Correlation Between Lam Research and Lasertec

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

Diversification Opportunities for Lam Research and Lasertec

0.64

Correlation Coefficient

Lam Research  Lasertec

Poor diversification

The 3 months correlation between Lam and Lasertec is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and Lasertec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lasertec 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 Lasertec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lasertec has no effect on the direction of Lam Research i.e., Lam Research and Lasertec go up and down completely randomly.

Pair Corralation between Lam Research and Lasertec

Given the investment horizon of 90 days Lam Research Corp is expected to generate 0.99 times more return on investment than Lasertec. However, Lam Research Corp is 1.01 times less risky than Lasertec. It trades about 0.01 of its potential returns per unit of risk. Lasertec is currently generating about -0.17 per unit of risk. If you would invest  7,637  in Lam Research Corp on September 17, 2024 and sell it today you would lose (11.00) from holding Lam Research Corp or give up 0.14% of portfolio value over 90 days.

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

Lam Research Corp  vs.  Lasertec

Lam Research Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lam Research Corp are ranked lower than 1 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Lasertec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lasertec has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lam Research and Lasertec

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

The idea behind Lam Research Corp and Lasertec 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.