Correlation Between Teradyne and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Teradyne 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 Teradyne and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teradyne and Lumentum Holdings, you can compare the effects of market volatilities on Teradyne 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 Teradyne with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teradyne and Lumentum Holdings.
Diversification Opportunities for Teradyne and Lumentum Holdings
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Teradyne and Lumentum is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Teradyne and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Teradyne 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 Teradyne 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 Teradyne i.e., Teradyne and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Teradyne and Lumentum Holdings
Considering the 90-day investment horizon Teradyne is expected to under-perform the Lumentum Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Teradyne is 1.27 times less risky than Lumentum Holdings. The stock trades about -0.2 of its potential returns per unit of risk. The Lumentum Holdings is currently generating about 0.32 of returns per unit of risk over similar time horizon. 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 Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Teradyne vs. Lumentum Holdings
Performance |
| Timeline |
| Teradyne |
| Lumentum Holdings |
Teradyne and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teradyne and Lumentum Holdings
The main advantage of trading using opposite Teradyne and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teradyne 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.| Teradyne vs. Amtech Systems | Teradyne vs. Veeco Instruments | Teradyne vs. Ichor Holdings | Teradyne vs. Axcelis Technologies |
| Lumentum Holdings vs. Hewlett Packard Enterprise | Lumentum Holdings vs. Juniper Networks | Lumentum Holdings vs. Cisco Systems | Lumentum Holdings 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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