Correlation Between Nokia Corp and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Nokia Corp 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 Nokia Corp and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nokia Corp ADR and Lumentum Holdings, you can compare the effects of market volatilities on Nokia Corp 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 Nokia Corp with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokia Corp and Lumentum Holdings.
Diversification Opportunities for Nokia Corp and Lumentum Holdings
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nokia and Lumentum is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nokia Corp ADR and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Nokia Corp 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 Nokia Corp ADR 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 Nokia Corp i.e., Nokia Corp and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Nokia Corp and Lumentum Holdings
Considering the 90-day investment horizon Nokia Corp ADR is expected to under-perform the Lumentum Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Nokia Corp ADR is 2.12 times less risky than Lumentum Holdings. The stock trades about -0.39 of its potential returns per unit of risk. The Lumentum Holdings is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 6,496 in Lumentum Holdings on August 27, 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nokia Corp ADR vs. Lumentum Holdings
Performance |
| Timeline |
| Nokia Corp ADR |
| Lumentum Holdings |
Nokia Corp and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nokia Corp and Lumentum Holdings
The main advantage of trading using opposite Nokia Corp and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokia Corp 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.| Nokia Corp vs. Ichor Holdings | Nokia Corp vs. Fabrinet | Nokia Corp vs. Hello Group | Nokia Corp vs. Ultra Clean Holdings |
| Lumentum Holdings vs. Ichor Holdings | Lumentum Holdings vs. Fabrinet | Lumentum Holdings vs. Hello Group | Lumentum Holdings vs. Ultra Clean Holdings |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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