Correlation Between Lam Research and Indie Semiconductor

Can any of the company-specific risk be diversified away by investing in both Lam Research and Indie Semiconductor 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 Indie Semiconductor 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 indie Semiconductor, you can compare the effects of market volatilities on Lam Research and Indie Semiconductor 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 Indie Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and Indie Semiconductor.

Diversification Opportunities for Lam Research and Indie Semiconductor

0.08

Correlation Coefficient

Lam Research  Indie Semiconductor

Significant diversification

The 3 months correlation between Lam and Indie is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and indie Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on indie Semiconductor 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 Indie Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of indie Semiconductor has no effect on the direction of Lam Research i.e., Lam Research and Indie Semiconductor go up and down completely randomly.

Pair Corralation between Lam Research and Indie Semiconductor

Given the investment horizon of 90 days Lam Research Corp is expected to generate 0.52 times more return on investment than Indie Semiconductor. However, Lam Research Corp is 1.92 times less risky than Indie Semiconductor. It trades about 0.03 of its potential returns per unit of risk. indie Semiconductor is currently generating about -0.18 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  163.00  from holding Lam Research Corp or generate 2.23% return on investment over 90 days.

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

Lam Research Corp  vs.  indie Semiconductor

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 strong fundamental indicators, Lam Research is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

indie Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days indie Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Lam Research and Indie Semiconductor

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

The idea behind Lam Research Corp and indie Semiconductor 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 Global Correlations module to find global opportunities by holding instruments from different markets.