Correlation Between Applied Materials and KLA

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

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

Diversification Opportunities for Applied Materials and KLA

0.94

Correlation Coefficient

Applied Materials  KLA

Almost no diversification

The 3 months correlation between Applied and KLA is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation and Applied Materials 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 Applied Materials are associated (or correlated) with KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Applied Materials i.e., Applied Materials and KLA go up and down completely randomly.

Pair Corralation between Applied Materials and KLA

Assuming the 90 days horizon Applied Materials is expected to generate 1.11 times less return on investment than KLA. In addition to that, Applied Materials is 1.19 times more volatile than KLA Corporation. It trades about 0.14 of its total potential returns per unit of risk. KLA Corporation is currently generating about 0.18 per unit of volatility. If you would invest  60,417  in KLA Corporation on April 25, 2025 and sell it today you would earn a total of  15,473  from holding KLA Corporation or generate 25.61% return on investment over 90 days.

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

Applied Materials  vs.  KLA Corp.

Applied Materials

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Applied Materials reported solid returns over the last few months and may actually be approaching a breakup point.

KLA Corporation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Corporation are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, KLA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials and KLA

The main advantage of trading using opposite Applied Materials and KLA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, KLA 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 will offset losses from the drop in KLA's long position.

The idea behind Applied Materials and KLA Corporation 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..