Correlation Between Lam Research and NVE
Can any of the company-specific risk be diversified away by investing in both Lam Research and NVE 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 NVE 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 NVE Corporation, you can compare the effects of market volatilities on Lam Research and NVE 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 NVE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and NVE.
Diversification Opportunities for Lam Research and NVE
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lam and NVE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and NVE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVE Corporation 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 NVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVE Corporation has no effect on the direction of Lam Research i.e., Lam Research and NVE go up and down completely randomly.
Pair Corralation between Lam Research and NVE
Given the investment horizon of 90 days Lam Research Corp is expected to under-perform the NVE. In addition to that, Lam Research is 1.24 times more volatile than NVE Corporation. It trades about -0.01 of its total potential returns per unit of risk. NVE Corporation is currently generating about 0.01 per unit of volatility. If you would invest 7,774 in NVE Corporation on September 2, 2024 and sell it today you would lose (46.00) from holding NVE Corporation or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lam Research Corp vs. NVE Corp.
Performance |
| Timeline |
| Lam Research Corp |
| NVE Corporation |
Lam Research and NVE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and NVE
The main advantage of trading using opposite Lam Research and NVE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, NVE 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 NVE will offset losses from the drop in NVE'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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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