Correlation Between Lumentum Holdings and Knowles Cor

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Can any of the company-specific risk be diversified away by investing in both Lumentum Holdings and Knowles Cor 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 Knowles Cor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumentum Holdings and Knowles Cor, you can compare the effects of market volatilities on Lumentum Holdings and Knowles Cor 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 Knowles Cor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and Knowles Cor.

Diversification Opportunities for Lumentum Holdings and Knowles Cor

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Lumentum and Knowles is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Knowles Cor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles Cor 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 Knowles Cor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles Cor has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Knowles Cor go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Knowles Cor

Given the investment horizon of 90 days Lumentum Holdings is expected to generate 1.55 times more return on investment than Knowles Cor. However, Lumentum Holdings is 1.55 times more volatile than Knowles Cor. It trades about 0.02 of its potential returns per unit of risk. Knowles Cor is currently generating about -0.02 per unit of risk. If you would invest  4,717  in Lumentum Holdings on December 30, 2023 and sell it today you would earn a total of  18.00  from holding Lumentum Holdings or generate 0.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Lumentum Holdings  vs.  Knowles Cor

 Performance 
       Timeline  
Lumentum Holdings 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Lumentum Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lumentum Holdings is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
Knowles Cor 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Knowles Cor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Lumentum Holdings and Knowles Cor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lumentum Holdings and Knowles Cor

The main advantage of trading using opposite Lumentum Holdings and Knowles Cor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, Knowles Cor 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 Knowles Cor will offset losses from the drop in Knowles Cor's long position.
The idea behind Lumentum Holdings and Knowles Cor 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.
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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