Correlation Between Ultra Clean and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Ultra Clean 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 Ultra Clean and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Clean Holdings and Lumentum Holdings, you can compare the effects of market volatilities on Ultra Clean 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 Ultra Clean with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Clean and Lumentum Holdings.
Diversification Opportunities for Ultra Clean and Lumentum Holdings
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ultra and Lumentum is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Ultra Clean 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 Ultra Clean Holdings 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 Ultra Clean i.e., Ultra Clean and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Ultra Clean and Lumentum Holdings
Given the investment horizon of 90 days Ultra Clean is expected to generate 4.67 times less return on investment than Lumentum Holdings. But when comparing it to its historical volatility, Ultra Clean Holdings is 1.34 times less risky than Lumentum Holdings. It trades about 0.11 of its potential returns per unit of risk. Lumentum Holdings is currently generating about 0.39 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 2,413 from holding Lumentum Holdings or generate 37.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Clean Holdings vs. Lumentum Holdings
Performance |
| Timeline |
| Ultra Clean Holdings |
| Lumentum Holdings |
Ultra Clean and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Clean and Lumentum Holdings
The main advantage of trading using opposite Ultra Clean and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean 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.The idea behind Ultra Clean Holdings and Lumentum Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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