Correlation Between Indie Semiconductor and Lam Research

Can any of the company-specific risk be diversified away by investing in both Indie Semiconductor and Lam Research 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 Indie Semiconductor and Lam Research into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between indie Semiconductor and Lam Research Corp, you can compare the effects of market volatilities on Indie Semiconductor and Lam Research 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 Indie Semiconductor with a short position of Lam Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indie Semiconductor and Lam Research.

Diversification Opportunities for Indie Semiconductor and Lam Research

-0.21

Correlation Coefficient

Indie Semiconductor  Lam Research

Very good diversification

The 3 months correlation between Indie and Lam is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding indie Semiconductor and Lam Research Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Research Corp and Indie Semiconductor 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 indie Semiconductor are associated (or correlated) with Lam Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Research Corp has no effect on the direction of Indie Semiconductor i.e., Indie Semiconductor and Lam Research go up and down completely randomly.

Pair Corralation between Indie Semiconductor and Lam Research

Given the investment horizon of 90 days indie Semiconductor is expected to generate 2.2 times more return on investment than Lam Research. However, Indie Semiconductor is 2.2 times more volatile than Lam Research Corp. It trades about -0.02 of its potential returns per unit of risk. Lam Research Corp is currently generating about -0.04 per unit of risk. If you would invest  780.00  in indie Semiconductor on September 3, 2024 and sell it today you would lose (252.00) from holding indie Semiconductor or give up 32.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

indie Semiconductor  vs.  Lam Research Corp

indie Semiconductor

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in indie Semiconductor are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Indie Semiconductor demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Lam Research Corp

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lam Research Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Lam Research is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Indie Semiconductor and Lam Research

The main advantage of trading using opposite Indie Semiconductor and Lam Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indie Semiconductor position performs unexpectedly, Lam Research 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 Lam Research will offset losses from the drop in Lam Research's long position.

The idea behind indie Semiconductor and Lam Research Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.