Correlation Between Lam Research and KLA Tencor
Can any of the company-specific risk be diversified away by investing in both Lam Research and KLA Tencor 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 KLA Tencor 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 KLA Tencor, you can compare the effects of market volatilities on Lam Research and KLA Tencor 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 KLA Tencor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and KLA Tencor.
Diversification Opportunities for Lam Research and KLA Tencor
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Lam and KLA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor 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 KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of Lam Research i.e., Lam Research and KLA Tencor go up and down completely randomly.
Pair Corralation between Lam Research and KLA Tencor
Given the investment horizon of 90 days Lam Research is expected to generate 1.02 times less return on investment than KLA Tencor. In addition to that, Lam Research is 1.01 times more volatile than KLA Tencor. It trades about 0.05 of its total potential returns per unit of risk. KLA Tencor is currently generating about 0.06 per unit of volatility. If you would invest 37,531 in KLA Tencor on August 27, 2024 and sell it today you would earn a total of 26,424 from holding KLA Tencor or generate 70.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lam Research Corp vs. KLA Tencor
Performance |
| Timeline |
| Lam Research Corp |
| KLA Tencor |
Lam Research and KLA Tencor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and KLA Tencor
The main advantage of trading using opposite Lam Research and KLA Tencor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, KLA Tencor 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 KLA Tencor will offset losses from the drop in KLA Tencor'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |