Correlation Between Black Diamond and Lumentum Holdings

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

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

Diversification Opportunities for Black Diamond and Lumentum Holdings

-0.76

Correlation Coefficient

Black Diamond  Lumentum Holdings

Pay attention - limited upside

The 3 months correlation between Black and Lumentum is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Black Diamond Therapeutics and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Black Diamond 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 Black Diamond Therapeutics 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 Black Diamond i.e., Black Diamond and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Black Diamond and Lumentum Holdings

Given the investment horizon of 90 days Black Diamond Therapeutics is expected to under-perform the Lumentum Holdings. In addition to that, Black Diamond is 1.33 times more volatile than Lumentum Holdings. It trades about -0.09 of its total potential returns per unit of risk. Lumentum Holdings is currently generating about 0.14 per unit of volatility. If you would invest  4,758  in Lumentum Holdings on September 21, 2024 and sell it today you would earn a total of  3,598  from holding Lumentum Holdings or generate 75.62% return on investment over 90 days.

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

Black Diamond Therapeutics  vs.  Lumentum Holdings

Black Diamond Therap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Diamond Therapeutics 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 fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Lumentum Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Black Diamond and Lumentum Holdings

The main advantage of trading using opposite Black Diamond and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Diamond 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 Black Diamond Therapeutics 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..