Correlation Between Lumentum Holdings and Applied Opt
Can any of the company-specific risk be diversified away by investing in both Lumentum Holdings and Applied Opt 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 Applied Opt into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumentum Holdings and Applied Opt, you can compare the effects of market volatilities on Lumentum Holdings and Applied Opt 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 Applied Opt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and Applied Opt.
Diversification Opportunities for Lumentum Holdings and Applied Opt
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lumentum and Applied is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Applied Opt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Opt 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 Applied Opt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Opt has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Applied Opt go up and down completely randomly.
Pair Corralation between Lumentum Holdings and Applied Opt
Given the investment horizon of 90 days Lumentum Holdings is expected to generate 3.11 times less return on investment than Applied Opt. But when comparing it to its historical volatility, Lumentum Holdings is 3.14 times less risky than Applied Opt. It trades about 0.36 of its potential returns per unit of risk. Applied Opt is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,660 in Applied Opt on August 28, 2024 and sell it today you would earn a total of 2,131 from holding Applied Opt or generate 128.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lumentum Holdings vs. Applied Opt
Performance |
| Timeline |
| Lumentum Holdings |
| Applied Opt |
Lumentum Holdings and Applied Opt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumentum Holdings and Applied Opt
The main advantage of trading using opposite Lumentum Holdings and Applied Opt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, Applied Opt 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 Applied Opt will offset losses from the drop in Applied Opt's long position.| Lumentum Holdings vs. Ichor Holdings | Lumentum Holdings vs. Fabrinet | Lumentum Holdings vs. Hello Group | Lumentum Holdings vs. Ultra Clean Holdings |
| Applied Opt vs. Lumentum Holdings | Applied Opt vs. Ichor Holdings | Applied Opt vs. Fabrinet | Applied Opt vs. Hello Group |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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