Correlation Between Lam Research and NORDIC HALIBUT

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

By analyzing existing cross correlation between Lam Research and NORDIC HALIBUT AS, you can compare the effects of market volatilities on Lam Research and NORDIC HALIBUT 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 NORDIC HALIBUT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and NORDIC HALIBUT.

Diversification Opportunities for Lam Research and NORDIC HALIBUT

0.12

Correlation Coefficient

Lam Research  NORDIC HALIBUT

Average diversification

The 3 months correlation between Lam and NORDIC is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research and NORDIC HALIBUT AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORDIC HALIBUT AS 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 are associated (or correlated) with NORDIC HALIBUT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORDIC HALIBUT AS has no effect on the direction of Lam Research i.e., Lam Research and NORDIC HALIBUT go up and down completely randomly.

Pair Corralation between Lam Research and NORDIC HALIBUT

Assuming the 90 days horizon Lam Research is expected to generate 1.16 times more return on investment than NORDIC HALIBUT. However, Lam Research is 1.16 times more volatile than NORDIC HALIBUT AS. It trades about 0.1 of its potential returns per unit of risk. NORDIC HALIBUT AS is currently generating about -0.18 per unit of risk. If you would invest  6,520  in Lam Research on September 16, 2024 and sell it today you would earn a total of  930.00  from holding Lam Research or generate 14.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

Lam Research  vs.  NORDIC HALIBUT AS

Lam Research

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Lam Research has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Lam Research reported solid returns over the last few months and may actually be approaching a breakup point.

NORDIC HALIBUT AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NORDIC HALIBUT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Lam Research and NORDIC HALIBUT

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

The idea behind Lam Research and NORDIC HALIBUT AS 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.