Correlation Between Quarterhill and Lumentum Holdings

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

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

Diversification Opportunities for Quarterhill and Lumentum Holdings

0.09

Correlation Coefficient

Quarterhill  Lumentum Holdings

Significant diversification

The 3 months correlation between Quarterhill and Lumentum is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Quarterhill and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Quarterhill 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 Quarterhill are associated (or correlated) with Lumentum Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumentum Holdings has no effect on the direction of Quarterhill i.e., Quarterhill and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Quarterhill and Lumentum Holdings

If you would invest  5,543  in Lumentum Holdings on September 4, 2024 and sell it today you would earn a total of  3,327  from holding Lumentum Holdings or generate 60.02% return on investment over 90 days.

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

Quarterhill  vs.  Lumentum Holdings

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.

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 unfluctuating basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quarterhill and Lumentum Holdings

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

The idea behind Quarterhill and Lumentum Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.