Correlation Between ASML Holding and Lam Research

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

By analyzing existing cross correlation between ASML Holding NV and Lam Research, you can compare the effects of market volatilities on ASML Holding and Lam Research 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 ASML Holding with a short position of Lam Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Lam Research.

Diversification Opportunities for ASML Holding and Lam Research

0.34

Correlation Coefficient

ASML Holding  Lam Research

Weak diversification

The 3 months correlation between ASML and Lam is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Lam Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Research and ASML Holding 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 ASML Holding NV are associated (or correlated) with Lam Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Research has no effect on the direction of ASML Holding i.e., ASML Holding and Lam Research go up and down completely randomly.

Pair Corralation between ASML Holding and Lam Research

Assuming the 90 days trading horizon ASML Holding NV is expected to under-perform the Lam Research. In addition to that, ASML Holding is 1.17 times more volatile than Lam Research. It trades about -0.04 of its total potential returns per unit of risk. Lam Research is currently generating about 0.05 per unit of volatility. If you would invest  6,608  in Lam Research on September 4, 2024 and sell it today you would earn a total of  452.00  from holding Lam Research or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

ASML Holding NV  vs.  Lam Research

ASML Holding NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Lam Research

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lam Research are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lam Research may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ASML Holding and Lam Research

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

The idea behind ASML Holding NV and Lam Research 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 CEOs Directory module to screen CEOs from public companies around the world.