Correlation Between Lumen Technologies and Cable One

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

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

Diversification Opportunities for Lumen Technologies and Cable One

0.87

Correlation Coefficient

Lumen Technologies  Cable One

Very poor diversification

The 3 months correlation between Lumen and Cable is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One and Lumen Technologies 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 Lumen Technologies are associated (or correlated) with Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Lumen Technologies i.e., Lumen Technologies and Cable One go up and down completely randomly.

Pair Corralation between Lumen Technologies and Cable One

Given the investment horizon of 90 days Lumen Technologies is expected to under-perform the Cable One. In addition to that, Lumen Technologies is 1.25 times more volatile than Cable One. It trades about -0.11 of its total potential returns per unit of risk. Cable One is currently generating about -0.07 per unit of volatility. If you would invest  44,112  in Cable One on March 4, 2024 and sell it today you would lose (5,521) from holding Cable One or give up 12.52% of portfolio value over 90 days.

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

Lumen Technologies  vs.  Cable One

Lumen Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lumen Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cable One

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cable One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Lumen Technologies and Cable One

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

The idea behind Lumen Technologies and Cable One 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.