Correlation Between Silicom and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Silicom 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 Silicom and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicom and Lumentum Holdings, you can compare the effects of market volatilities on Silicom 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 Silicom with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicom and Lumentum Holdings.
Diversification Opportunities for Silicom and Lumentum Holdings
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silicom and Lumentum is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Silicom 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 Silicom 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 Silicom i.e., Silicom and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Silicom and Lumentum Holdings
Given the investment horizon of 90 days Silicom is expected to under-perform the Lumentum Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Silicom is 1.37 times less risky than Lumentum Holdings. The stock trades about -0.05 of its potential returns per unit of risk. The Lumentum Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. 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 |
Silicom vs. Lumentum Holdings
Performance |
| Timeline |
| Silicom |
| Lumentum Holdings |
Silicom and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicom and Lumentum Holdings
The main advantage of trading using opposite Silicom and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicom 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.| Silicom vs. Ituran Location and | Silicom vs. Sapiens International | Silicom vs. Allot Communications | Silicom vs. Radcom |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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