Correlation Between Lam Research and ASML Holding

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

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

Diversification Opportunities for Lam Research and ASML Holding

0.57

Correlation Coefficient

Lam Research  ASML Holding

Very weak diversification

The 3 months correlation between Lam and ASML is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV and Lam Research 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 Lam Research Corp are associated (or correlated) with ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of Lam Research i.e., Lam Research and ASML Holding go up and down completely randomly.

Pair Corralation between Lam Research and ASML Holding

Given the investment horizon of 90 days Lam Research Corp is expected to generate 1.08 times more return on investment than ASML Holding. However, Lam Research is 1.08 times more volatile than ASML Holding NV. It trades about 0.04 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.03 per unit of risk. 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

Lam Research Corp  vs.  ASML Holding NV

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.

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.

Pair Trading with Lam Research and ASML Holding

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

The idea behind Lam Research Corp and ASML Holding NV 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.

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 the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.