Correlation Between Photronics and Lam Research

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

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

Diversification Opportunities for Photronics and Lam Research

-0.26

Correlation Coefficient

Photronics  Lam Research

Very good diversification

The 3 months correlation between Photronics and Lam is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Photronics 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 Photronics 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 Photronics 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 Photronics i.e., Photronics and Lam Research go up and down completely randomly.

Pair Corralation between Photronics and Lam Research

Given the investment horizon of 90 days Photronics is expected to generate 1.14 times more return on investment than Lam Research. However, Photronics is 1.14 times more volatile than Lam Research Corp. It trades about -0.08 of its potential returns per unit of risk. Lam Research Corp is currently generating about -0.19 per unit of risk. If you would invest  2,878  in Photronics on February 1, 2024 and sell it today you would lose (137.00) from holding Photronics or give up 4.76% of portfolio value over 90 days.

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

Photronics  vs.  Lam Research Corp

Photronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Photronics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lam Research Corp

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lam Research Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Lam Research may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Photronics and Lam Research

The main advantage of trading using opposite Photronics and Lam Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Photronics 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 Photronics 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 CEOs Directory module to screen CEOs from public companies around the world.