Correlation Between Veeco Instruments and Lumentum Holdings
Can any of the company-specific risk be diversified away by investing in both Veeco Instruments 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 Veeco Instruments and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Veeco Instruments and Lumentum Holdings, you can compare the effects of market volatilities on Veeco Instruments 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 Veeco Instruments with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veeco Instruments and Lumentum Holdings.
Diversification Opportunities for Veeco Instruments and Lumentum Holdings
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Veeco and Lumentum is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Veeco Instruments and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Veeco Instruments 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 Veeco Instruments 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 Veeco Instruments i.e., Veeco Instruments and Lumentum Holdings go up and down completely randomly.
Pair Corralation between Veeco Instruments and Lumentum Holdings
Given the investment horizon of 90 days Veeco Instruments is expected to generate 61.79 times less return on investment than Lumentum Holdings. But when comparing it to its historical volatility, Veeco Instruments is 1.3 times less risky than Lumentum Holdings. It trades about 0.0 of its potential returns per unit of risk. Lumentum Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,230 in Lumentum Holdings on August 24, 2024 and sell it today you would earn a total of 4,681 from holding Lumentum Holdings or generate 110.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Veeco Instruments vs. Lumentum Holdings
Performance |
| Timeline |
| Veeco Instruments |
| Lumentum Holdings |
Veeco Instruments and Lumentum Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Veeco Instruments and Lumentum Holdings
The main advantage of trading using opposite Veeco Instruments and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Veeco Instruments 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.| Veeco Instruments vs. Ultra Clean Holdings | Veeco Instruments vs. Cohu Inc | Veeco Instruments vs. Ichor Holdings | Veeco Instruments vs. Entegris |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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