Correlation Between Lumentum Holdings and Silicom
Can any of the company-specific risk be diversified away by investing in both Lumentum Holdings and Silicom 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 Silicom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumentum Holdings and Silicom, you can compare the effects of market volatilities on Lumentum Holdings and Silicom 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 Silicom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumentum Holdings and Silicom.
Diversification Opportunities for Lumentum Holdings and Silicom
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumentum and Silicom is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Silicom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicom 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 Silicom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicom has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Silicom go up and down completely randomly.
Pair Corralation between Lumentum Holdings and Silicom
Given the investment horizon of 90 days Lumentum Holdings is expected to generate 1.37 times more return on investment than Silicom. However, Lumentum Holdings is 1.37 times more volatile than Silicom. It trades about 0.17 of its potential returns per unit of risk. Silicom is currently generating about -0.05 per unit of risk. If you would invest 4,421 in Lumentum Holdings on August 31, 2024 and sell it today you would earn a total of 4,276 from holding Lumentum Holdings or generate 96.72% 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. Silicom
Performance |
| Timeline |
| Lumentum Holdings |
| Silicom |
Lumentum Holdings and Silicom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumentum Holdings and Silicom
The main advantage of trading using opposite Lumentum Holdings and Silicom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, Silicom 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 Silicom will offset losses from the drop in Silicom's long position.| Lumentum Holdings vs. NETGEAR | Lumentum Holdings vs. KVH Industries | Lumentum Holdings vs. Telesat Corp | Lumentum Holdings vs. Juniper Networks |
| Silicom vs. Ituran Location and | Silicom vs. Sapiens International | Silicom vs. Allot Communications | Silicom vs. Radcom |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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