Correlation Between Baylin Technologies and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Baylin Technologies 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 Baylin Technologies and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Baylin Technologies and Lumentum Holdings, you can compare the effects of market volatilities on Baylin Technologies 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 Baylin Technologies with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Baylin Technologies and Lumentum Holdings.
Diversification Opportunities for Baylin Technologies and Lumentum Holdings
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Baylin and Lumentum is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Baylin Technologies and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Baylin 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 Baylin Technologies 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 Baylin Technologies i.e., Baylin Technologies and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Baylin Technologies and Lumentum Holdings
Assuming the 90 days horizon Baylin Technologies is expected to generate 4.37 times less return on investment than Lumentum Holdings. But when comparing it to its historical volatility, Baylin Technologies is 2.09 times less risky than Lumentum Holdings. It trades about 0.14 of its potential returns per unit of risk. Lumentum Holdings is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 6,535 in Lumentum Holdings on August 31, 2024 and sell it today you would earn a total of 1,842 from holding Lumentum Holdings or generate 28.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Baylin Technologies vs. Lumentum Holdings
Performance |
| Timeline |
| Baylin Technologies |
| Lumentum Holdings |
Baylin Technologies and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Baylin Technologies and Lumentum Holdings
The main advantage of trading using opposite Baylin Technologies and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Baylin Technologies 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.| Baylin Technologies vs. Metalert | Baylin Technologies vs. Viavi Solutions | Baylin Technologies vs. SatixFy Communications | Baylin Technologies vs. BK Technologies |
| Lumentum Holdings vs. NETGEAR | Lumentum Holdings vs. KVH Industries | Lumentum Holdings vs. Telesat Corp | Lumentum Holdings vs. Juniper Networks |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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