Correlation Between Lam Research and Veeco Instruments
Can any of the company-specific risk be diversified away by investing in both Lam Research and Veeco Instruments 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 Veeco Instruments 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 Veeco Instruments, you can compare the effects of market volatilities on Lam Research and Veeco Instruments 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 Veeco Instruments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and Veeco Instruments.
Diversification Opportunities for Lam Research and Veeco Instruments
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lam and Veeco is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and Veeco Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeco Instruments 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 Veeco Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeco Instruments has no effect on the direction of Lam Research i.e., Lam Research and Veeco Instruments go up and down completely randomly.
Pair Corralation between Lam Research and Veeco Instruments
Given the investment horizon of 90 days Lam Research Corp is expected to generate 1.18 times more return on investment than Veeco Instruments. However, Lam Research is 1.18 times more volatile than Veeco Instruments. It trades about -0.01 of its potential returns per unit of risk. Veeco Instruments is currently generating about -0.13 per unit of risk. If you would invest 7,949 in Lam Research Corp on October 31, 2024 and sell it today you would lose (434.00) from holding Lam Research Corp or give up 5.46% 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. Veeco Instruments
Performance |
| Timeline |
| Lam Research Corp |
| Veeco Instruments |
Lam Research and Veeco Instruments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and Veeco Instruments
The main advantage of trading using opposite Lam Research and Veeco Instruments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, Veeco Instruments 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 Veeco Instruments will offset losses from the drop in Veeco Instruments' long position.| Lam Research vs. Diodes Incorporated | Lam Research vs. Daqo New Energy | Lam Research vs. Micron Technology | Lam Research vs. MagnaChip Semiconductor |
| Veeco Instruments vs. NVE Corporation | Veeco Instruments vs. Photronics | Veeco Instruments vs. Kulicke and Soffa | Veeco Instruments vs. Alvarium Tiedemann 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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