Correlation Between AdvanceTC and Lumentum Holdings

Can any of the company-specific risk be diversified away by investing in both AdvanceTC 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 AdvanceTC and Lumentum Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AdvanceTC Limited and Lumentum Holdings, you can compare the effects of market volatilities on AdvanceTC 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 AdvanceTC with a short position of Lumentum Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvanceTC and Lumentum Holdings.

Diversification Opportunities for AdvanceTC and Lumentum Holdings

-0.06

Correlation Coefficient

AdvanceTC  Lumentum Holdings

Good diversification

The 3 months correlation between AdvanceTC and Lumentum is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding AdvanceTC Limited and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and AdvanceTC 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 AdvanceTC Limited 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 AdvanceTC i.e., AdvanceTC and Lumentum Holdings go up and down completely randomly.

Pair Corralation between AdvanceTC and Lumentum Holdings

Assuming the 90 days horizon AdvanceTC Limited is expected to generate 27.22 times more return on investment than Lumentum Holdings. However, AdvanceTC is 27.22 times more volatile than Lumentum Holdings. It trades about 0.1 of its potential returns per unit of risk. Lumentum Holdings is currently generating about 0.04 per unit of risk. If you would invest  0.06  in AdvanceTC Limited on November 20, 2024 and sell it today you would earn a total of  0.94  from holding AdvanceTC Limited or generate 1566.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

AdvanceTC Limited  vs.  Lumentum Holdings

AdvanceTC Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvanceTC Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, AdvanceTC reported solid returns over the last few months and may actually be approaching a breakup point.

Lumentum Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lumentum Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lumentum Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AdvanceTC and Lumentum Holdings

The main advantage of trading using opposite AdvanceTC and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AdvanceTC 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 AdvanceTC Limited 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.