Correlation Between Cognex and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Cognex 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 Cognex and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cognex and Lumentum Holdings, you can compare the effects of market volatilities on Cognex 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 Cognex with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognex and Lumentum Holdings.
Diversification Opportunities for Cognex and Lumentum Holdings
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cognex and Lumentum is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Cognex 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 Cognex 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 Cognex i.e., Cognex and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Cognex and Lumentum Holdings
Given the investment horizon of 90 days Cognex is expected to generate 6.23 times less return on investment than Lumentum Holdings. But when comparing it to its historical volatility, Cognex is 1.45 times less risky than Lumentum Holdings. It trades about 0.02 of its potential returns per unit of risk. Lumentum Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,230 in Lumentum Holdings on August 24, 2024 and sell it today you would earn a total of 4,681 from holding Lumentum Holdings or generate 110.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cognex vs. Lumentum Holdings
Performance |
| Timeline |
| Cognex |
| Lumentum Holdings |
Cognex and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cognex and Lumentum Holdings
The main advantage of trading using opposite Cognex and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognex 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.| Cognex vs. Vontier Corp | Cognex vs. Teledyne Technologies Incorporated | Cognex vs. ESCO Technologies | Cognex vs. MKS Instruments |
| Lumentum Holdings vs. Hewlett Packard Enterprise | Lumentum Holdings vs. Juniper Networks | Lumentum Holdings vs. Cisco Systems | Lumentum Holdings vs. Viavi Solutions |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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