Correlation Between Lam Research and AXT
Can any of the company-specific risk be diversified away by investing in both Lam Research and AXT 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 AXT 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 AXT Inc, you can compare the effects of market volatilities on Lam Research and AXT 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 AXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and AXT.
Diversification Opportunities for Lam Research and AXT
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lam and AXT is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT 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 Corp are associated (or correlated) with AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Lam Research i.e., Lam Research and AXT go up and down completely randomly.
Pair Corralation between Lam Research and AXT
Given the investment horizon of 90 days Lam Research Corp is expected to generate 0.65 times more return on investment than AXT. However, Lam Research Corp is 1.53 times less risky than AXT. It trades about 0.15 of its potential returns per unit of risk. AXT Inc is currently generating about -0.08 per unit of risk. If you would invest 7,511 in Lam Research Corp on November 4, 2024 and sell it today you would earn a total of 562.00 from holding Lam Research Corp or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Lam Research Corp vs. AXT Inc
Performance |
| Timeline |
| Lam Research Corp |
| AXT Inc |
Lam Research and AXT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and AXT
The main advantage of trading using opposite Lam Research and AXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, AXT 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 AXT will offset losses from the drop in AXT's long position.| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |