Correlation Between AudioCodes and Lumentum Holdings

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

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

Diversification Opportunities for AudioCodes and Lumentum Holdings

0.04

Correlation Coefficient

AudioCodes  Lumentum Holdings

Significant diversification

The 3 months correlation between AudioCodes and Lumentum is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding AudioCodes and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and AudioCodes 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 AudioCodes 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 AudioCodes i.e., AudioCodes and Lumentum Holdings go up and down completely randomly.

Pair Corralation between AudioCodes and Lumentum Holdings

Given the investment horizon of 90 days AudioCodes is expected to generate 0.49 times more return on investment than Lumentum Holdings. However, AudioCodes is 2.03 times less risky than Lumentum Holdings. It trades about 0.01 of its potential returns per unit of risk. Lumentum Holdings is currently generating about -0.07 per unit of risk. If you would invest  959.00  in AudioCodes on December 31, 2024 and sell it today you would lose (4.00) from holding AudioCodes or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AudioCodes  vs.  Lumentum Holdings

AudioCodes

Risk-Adjusted Performance

Weak

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

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with AudioCodes and Lumentum Holdings

The main advantage of trading using opposite AudioCodes and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AudioCodes 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 AudioCodes 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.