Correlation Between Akamai Technologies and KLA Tencor

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Can any of the company-specific risk be diversified away by investing in both Akamai Technologies and KLA Tencor at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Akamai Technologies and KLA Tencor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Akamai Technologies and KLA-Tencor, you can compare the effects of market volatilities on Akamai Technologies and KLA Tencor and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Akamai Technologies with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akamai Technologies and KLA Tencor.

Diversification Opportunities for Akamai Technologies and KLA Tencor

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Akamai and KLA Tencor is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies and KLA-Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA-Tencor and Akamai Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Akamai Technologies are associated (or correlated) with KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA-Tencor has no effect on the direction of Akamai Technologies i.e., Akamai Technologies and KLA Tencor go up and down completely randomly.

Pair Corralation between Akamai Technologies and KLA Tencor

Given the investment horizon of 90 days Akamai Technologies is expected to generate 1.62 times less return on investment than KLA Tencor. But when comparing it to its historical volatility, Akamai Technologies is 1.35 times less risky than KLA Tencor. It trades about 0.27 of its potential returns per unit of risk. KLA-Tencor is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  32,687  in KLA-Tencor on September 5, 2022 and sell it today you would earn a total of  6,269  from holding KLA-Tencor or generate 19.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Akamai Technologies  vs.  KLA-Tencor

 Performance (%) 
       Timeline  
Akamai Technologies 
Akamai Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Akamai Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Akamai Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Akamai Price Channel

KLA-Tencor 
KLA Tencor Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in KLA-Tencor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KLA Tencor sustained solid returns over the last few months and may actually be approaching a breakup point.

KLA Tencor Price Channel

Akamai Technologies and KLA Tencor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Akamai Technologies and KLA Tencor

The main advantage of trading using opposite Akamai Technologies and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akamai Technologies position performs unexpectedly, KLA Tencor can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in KLA Tencor will offset losses from the drop in KLA Tencor's long position.
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The idea behind Akamai Technologies and KLA-Tencor pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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