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 Corp, 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

0.57

Correlation Coefficient

ASML Holding  Lam Research

Very weak diversification

The 3 months correlation between ASML and Lam is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Lam Research Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Research Corp 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 Corp 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

Given the investment horizon of 90 days ASML Holding is expected to generate 1.58 times less return on investment than Lam Research. But when comparing it to its historical volatility, ASML Holding NV is 1.08 times less risky than Lam Research. It trades about 0.03 of its potential returns per unit of risk. Lam Research Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7,318  in Lam Research Corp on December 27, 2024 and sell it today you would earn a total of  296.00  from holding Lam Research Corp or generate 4.04% return on investment over 90 days.

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

ASML Holding NV  vs.  Lam Research Corp

ASML Holding NV

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, ASML Holding is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Lam Research Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lam Research Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, Lam Research may actually be approaching a critical reversion point that can send shares even higher in April 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 Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .