Correlation Between KLA and Lam Research
Can any of the company-specific risk be diversified away by investing in both KLA 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 KLA and Lam Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Corporation and Lam Research, you can compare the effects of market volatilities on KLA 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 KLA with a short position of Lam Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA and Lam Research.
Diversification Opportunities for KLA and Lam Research
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KLA and Lam is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding KLA Corp. and Lam Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Research and KLA 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 KLA Corporation 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 has no effect on the direction of KLA i.e., KLA and Lam Research go up and down completely randomly.
Pair Corralation between KLA and Lam Research
Assuming the 90 days horizon KLA Corporation is expected to generate 1.22 times more return on investment than Lam Research. However, KLA is 1.22 times more volatile than Lam Research. It trades about 0.0 of its potential returns per unit of risk. Lam Research is currently generating about -0.04 per unit of risk. If you would invest 65,036 in KLA Corporation on September 1, 2024 and sell it today you would lose (3,856) from holding KLA Corporation or give up 5.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.48% |
| Values | Daily Returns |
KLA Corp. vs. Lam Research
Performance |
| Timeline |
| KLA Corporation |
| Lam Research |
KLA and Lam Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA and Lam Research
The main advantage of trading using opposite KLA and Lam Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA 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.| KLA vs. SAFETY MEDICAL PROD | KLA vs. Avanos Medical | KLA vs. AIR PRODCHEMICALS | KLA vs. Clean Energy Fuels |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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