Correlation Between Lumentum Holdings and II-VI Incorporated

Can any of the company-specific risk be diversified away by investing in both Lumentum Holdings and II-VI Incorporated 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 Lumentum Holdings and II-VI Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lumentum Holdings and II VI Incorporated, you can compare the effects of market volatilities on Lumentum Holdings and II-VI Incorporated 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 Lumentum Holdings with a short position of II-VI Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and II-VI Incorporated.

Diversification Opportunities for Lumentum Holdings and II-VI Incorporated

0.0

Correlation Coefficient

Lumentum Holdings  II-VI Incorporated

Pay attention - limited upside

The 3 months correlation between Lumentum and II-VI is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and II VI Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on II-VI Incorporated and Lumentum Holdings 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 Lumentum Holdings are associated (or correlated) with II-VI Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of II-VI Incorporated has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and II-VI Incorporated go up and down completely randomly.

Pair Corralation between Lumentum Holdings and II-VI Incorporated

If you would invest  5,761  in Lumentum Holdings on August 30, 2024 and sell it today you would earn a total of  2,616  from holding Lumentum Holdings or generate 45.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Lumentum Holdings  vs.  II VI Incorporated

Lumentum Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

II-VI Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days II VI Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, II-VI Incorporated is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lumentum Holdings and II-VI Incorporated

The main advantage of trading using opposite Lumentum Holdings and II-VI Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, II-VI Incorporated 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 II-VI Incorporated will offset losses from the drop in II-VI Incorporated's long position.

The idea behind Lumentum Holdings and II VI Incorporated 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.