Correlation Between Lumentum Holdings and Quarterhill

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

By analyzing existing cross correlation between Lumentum Holdings and Quarterhill, you can compare the effects of market volatilities on Lumentum Holdings and Quarterhill 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 Quarterhill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and Quarterhill.

Diversification Opportunities for Lumentum Holdings and Quarterhill

0.05

Correlation Coefficient

Lumentum Holdings  Quarterhill

Significant diversification

The 3 months correlation between Lumentum and Quarterhill is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Quarterhill in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quarterhill 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 Quarterhill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quarterhill has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Quarterhill go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Quarterhill

If you would invest  5,425  in Lumentum Holdings on September 12, 2024 and sell it today you would earn a total of  3,272  from holding Lumentum Holdings or generate 60.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Lumentum Holdings  vs.  Quarterhill

Lumentum Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Quarterhill

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quarterhill has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Quarterhill is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lumentum Holdings and Quarterhill

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

The idea behind Lumentum Holdings and Quarterhill 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.