Correlation Between Lam Research and Onto Innovation
Can any of the company-specific risk be diversified away by investing in both Lam Research and Onto Innovation 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 Onto Innovation 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 Onto Innovation, you can compare the effects of market volatilities on Lam Research and Onto Innovation 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 Onto Innovation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and Onto Innovation.
Diversification Opportunities for Lam Research and Onto Innovation
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lam and Onto is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and Onto Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onto Innovation 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 Onto Innovation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onto Innovation has no effect on the direction of Lam Research i.e., Lam Research and Onto Innovation go up and down completely randomly.
Pair Corralation between Lam Research and Onto Innovation
Given the investment horizon of 90 days Lam Research is expected to generate 1.82 times less return on investment than Onto Innovation. But when comparing it to its historical volatility, Lam Research Corp is 1.3 times less risky than Onto Innovation. It trades about 0.03 of its potential returns per unit of risk. Onto Innovation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,222 in Onto Innovation on August 31, 2024 and sell it today you would earn a total of 5,196 from holding Onto Innovation or generate 46.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lam Research Corp vs. Onto Innovation
Performance |
| Timeline |
| Lam Research Corp |
| Onto Innovation |
Lam Research and Onto Innovation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and Onto Innovation
The main advantage of trading using opposite Lam Research and Onto Innovation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, Onto Innovation 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 Onto Innovation will offset losses from the drop in Onto Innovation's long position.| Lam Research vs. NVE Corporation | Lam Research vs. Photronics | Lam Research vs. Kulicke and Soffa | Lam Research vs. Alvarium Tiedemann Holdings |
| Onto Innovation vs. Camtek | Onto Innovation vs. Amtech Systems | Onto Innovation vs. Veeco Instruments | Onto Innovation vs. Ichor Holdings |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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