Correlation Between Lam Research and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both Lam Research and Silicon Motion 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 Silicon Motion 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 Silicon Motion Technology, you can compare the effects of market volatilities on Lam Research and Silicon Motion 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 Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and Silicon Motion.
Diversification Opportunities for Lam Research and Silicon Motion
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lam and Silicon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology 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 Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of Lam Research i.e., Lam Research and Silicon Motion go up and down completely randomly.
Pair Corralation between Lam Research and Silicon Motion
Given the investment horizon of 90 days Lam Research Corp is expected to under-perform the Silicon Motion. But the stock apears to be less risky and, when comparing its historical volatility, Lam Research Corp is 1.12 times less risky than Silicon Motion. The stock trades about -0.03 of its potential returns per unit of risk. The Silicon Motion Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 5,616 in Silicon Motion Technology on August 28, 2024 and sell it today you would lose (35.00) from holding Silicon Motion Technology or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lam Research Corp vs. Silicon Motion Technology
Performance |
| Timeline |
| Lam Research Corp |
| Silicon Motion Technology |
Lam Research and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and Silicon Motion
The main advantage of trading using opposite Lam Research and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, Silicon Motion 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 Silicon Motion will offset losses from the drop in Silicon Motion's long position.| Lam Research vs. ASML Holding NV | Lam Research vs. KLA Tencor | Lam Research vs. Axcelis Technologies | Lam Research vs. Teradyne |
| Silicon Motion vs. ASE Industrial Holding | Silicon Motion vs. United Microelectronics | Silicon Motion vs. ChipMOS Technologies | Silicon Motion vs. SemiLEDS |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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