Correlation Between CACI International and KLA Tencor

Can any of the company-specific risk be diversified away by investing in both CACI International 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 CACI International and KLA Tencor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CACI International and KLA Tencor, you can compare the effects of market volatilities on CACI International 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 CACI International with a short position of KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of CACI International and KLA Tencor.

Diversification Opportunities for CACI International and KLA Tencor

0.74

Correlation Coefficient

CACI International  KLA Tencor

Poor diversification

The 3 months correlation between CACI and KLA is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CACI International and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor and CACI International 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 CACI International 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 CACI International i.e., CACI International and KLA Tencor go up and down completely randomly.

Pair Corralation between CACI International and KLA Tencor

Given the investment horizon of 90 days CACI International is expected to generate 0.68 times more return on investment than KLA Tencor. However, CACI International is 1.47 times less risky than KLA Tencor. It trades about 0.23 of its potential returns per unit of risk. KLA Tencor is currently generating about 0.0 per unit of risk. If you would invest  37,498  in CACI International on January 29, 2024 and sell it today you would earn a total of  2,989  from holding CACI International or generate 7.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

CACI International  vs.  KLA Tencor

CACI International

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CACI International are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, CACI International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

KLA Tencor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KLA Tencor exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CACI International and KLA Tencor

The main advantage of trading using opposite CACI International and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CACI International 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.

The idea behind CACI International 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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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 the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.