Correlation Between Aehr Test and Lam Research
Can any of the company-specific risk be diversified away by investing in both Aehr Test 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 Aehr Test and Lam Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aehr Test Systems and Lam Research Corp, you can compare the effects of market volatilities on Aehr Test 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 Aehr Test with a short position of Lam Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aehr Test and Lam Research.
Diversification Opportunities for Aehr Test and Lam Research
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aehr and Lam is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Aehr Test Systems 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 Aehr Test 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 Aehr Test Systems 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 Aehr Test i.e., Aehr Test and Lam Research go up and down completely randomly.
Pair Corralation between Aehr Test and Lam Research
Given the investment horizon of 90 days Aehr Test Systems is expected to under-perform the Lam Research. In addition to that, Aehr Test is 1.8 times more volatile than Lam Research Corp. It trades about -0.26 of its total potential returns per unit of risk. Lam Research Corp is currently generating about -0.06 per unit of volatility. If you would invest 7,545 in Lam Research Corp on August 27, 2024 and sell it today you would lose (281.00) from holding Lam Research Corp or give up 3.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aehr Test Systems vs. Lam Research Corp
Performance |
| Timeline |
| Aehr Test Systems |
| Lam Research Corp |
Aehr Test and Lam Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aehr Test and Lam Research
The main advantage of trading using opposite Aehr Test and Lam Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aehr Test 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 Aehr Test Systems 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.| Lam Research vs. ASML Holding NV | Lam Research vs. KLA Tencor | Lam Research vs. Axcelis Technologies | Lam Research vs. Teradyne |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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