Correlation Between LAM RESEARCH and Apple
Can any of the company-specific risk be diversified away by investing in both LAM RESEARCH and Apple 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 Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LAM RESEARCH P and Apple Inc, you can compare the effects of market volatilities on LAM RESEARCH and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of LAM RESEARCH and Apple.
Diversification Opportunities for LAM RESEARCH and Apple
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between LAM and Apple is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding LAM RESEARCH P and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 P are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of LAM RESEARCH i.e., LAM RESEARCH and Apple go up and down completely randomly.
Pair Corralation between LAM RESEARCH and Apple
Assuming the 90 days trading horizon LAM RESEARCH is expected to generate 1.03 times less return on investment than Apple. In addition to that, LAM RESEARCH is 1.73 times more volatile than Apple Inc. It trades about 0.05 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.08 per unit of volatility. If you would invest 17,419 in Apple Inc on September 14, 2024 and sell it today you would earn a total of 6,241 from holding Apple Inc or generate 35.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.8% |
| Values | Daily Returns |
LAM RESEARCH P vs. Apple Inc
Performance |
| Timeline |
| LAM RESEARCH P |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Apple Inc |
LAM RESEARCH and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LAM RESEARCH and Apple
The main advantage of trading using opposite LAM RESEARCH and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LAM RESEARCH position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| LAM RESEARCH vs. Apple Inc | LAM RESEARCH vs. Apple Inc | LAM RESEARCH vs. Apple Inc | LAM RESEARCH vs. Apple Inc |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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