Correlation Between Lumentum Holdings and Infinera
Can any of the company-specific risk be diversified away by investing in both Lumentum Holdings and Infinera 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 Infinera into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumentum Holdings and Infinera, you can compare the effects of market volatilities on Lumentum Holdings and Infinera 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 Infinera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and Infinera.
Diversification Opportunities for Lumentum Holdings and Infinera
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lumentum and Infinera is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera 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 Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Infinera go up and down completely randomly.
Pair Corralation between Lumentum Holdings and Infinera
Given the investment horizon of 90 days Lumentum Holdings is expected to generate 7.0 times more return on investment than Infinera. However, Lumentum Holdings is 7.0 times more volatile than Infinera. It trades about 0.32 of its potential returns per unit of risk. Infinera is currently generating about -0.1 per unit of risk. If you would invest 6,566 in Lumentum Holdings on August 24, 2024 and sell it today you would earn a total of 1,995 from holding Lumentum Holdings or generate 30.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lumentum Holdings vs. Infinera
Performance |
| Timeline |
| Lumentum Holdings |
| Infinera |
Lumentum Holdings and Infinera Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumentum Holdings and Infinera
The main advantage of trading using opposite Lumentum Holdings and Infinera positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, Infinera 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 Infinera will offset losses from the drop in Infinera's long position.| Lumentum Holdings vs. Hewlett Packard Enterprise | Lumentum Holdings vs. Juniper Networks | Lumentum Holdings vs. Cisco Systems | Lumentum Holdings vs. Viavi Solutions |
| Infinera vs. Hewlett Packard Enterprise | Infinera vs. Juniper Networks | Infinera vs. Cisco Systems | Infinera 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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