Correlation Between Lam Research and Daqo New
Can any of the company-specific risk be diversified away by investing in both Lam Research and Daqo New 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 Daqo New 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 Daqo New Energy, you can compare the effects of market volatilities on Lam Research and Daqo New 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 Daqo New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Research and Daqo New.
Diversification Opportunities for Lam Research and Daqo New
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lam and Daqo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Lam Research Corp and Daqo New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daqo New Energy 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 Daqo New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daqo New Energy has no effect on the direction of Lam Research i.e., Lam Research and Daqo New go up and down completely randomly.
Pair Corralation between Lam Research and Daqo New
Given the investment horizon of 90 days Lam Research Corp is expected to generate 0.59 times more return on investment than Daqo New. However, Lam Research Corp is 1.7 times less risky than Daqo New. It trades about 0.12 of its potential returns per unit of risk. Daqo New Energy is currently generating about 0.04 per unit of risk. If you would invest 78,396 in Lam Research Corp on January 18, 2024 and sell it today you would earn a total of 12,830 from holding Lam Research Corp or generate 16.37% 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. Daqo New Energy
Performance |
| Timeline |
| Lam Research Corp |
| Daqo New Energy |
Lam Research and Daqo New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Research and Daqo New
The main advantage of trading using opposite Lam Research and Daqo New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Research position performs unexpectedly, Daqo New 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 Daqo New will offset losses from the drop in Daqo New's long position.| Lam Research vs. NVE Corporation | Lam Research vs. Photronics | Lam Research vs. Kulicke and Soffa | Lam Research vs. Alvarium Tiedemann Holdings |
| Daqo New vs. Axcelis Technologies | Daqo New vs. Kulicke and Soffa | Daqo New vs. Ultra Clean Holdings | Daqo New vs. Cohu Inc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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