Correlation Between Lumentum Holdings and Cognex
Can any of the company-specific risk be diversified away by investing in both Lumentum Holdings and Cognex 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 Cognex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumentum Holdings and Cognex, you can compare the effects of market volatilities on Lumentum Holdings and Cognex 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 Cognex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and Cognex.
Diversification Opportunities for Lumentum Holdings and Cognex
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumentum and Cognex is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Cognex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognex 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 Cognex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognex has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Cognex go up and down completely randomly.
Pair Corralation between Lumentum Holdings and Cognex
Given the investment horizon of 90 days Lumentum Holdings is expected to generate 1.75 times more return on investment than Cognex. However, Lumentum Holdings is 1.75 times more volatile than Cognex. It trades about 0.36 of its potential returns per unit of risk. Cognex is currently generating about 0.13 per unit of risk. If you would invest 6,496 in Lumentum Holdings on August 28, 2024 and sell it today you would earn a total of 2,224 from holding Lumentum Holdings or generate 34.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lumentum Holdings vs. Cognex
Performance |
| Timeline |
| Lumentum Holdings |
| Cognex |
Lumentum Holdings and Cognex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumentum Holdings and Cognex
The main advantage of trading using opposite Lumentum Holdings and Cognex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, Cognex 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 Cognex will offset losses from the drop in Cognex's long position.| Lumentum Holdings vs. Ichor Holdings | Lumentum Holdings vs. Fabrinet | Lumentum Holdings vs. Hello Group | Lumentum Holdings vs. Ultra Clean Holdings |
| Cognex vs. Vontier Corp | Cognex vs. Teledyne Technologies Incorporated | Cognex vs. ESCO Technologies | Cognex vs. MKS Instruments |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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