Correlation Between Lumentum Holdings and AdvanceTC

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

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

Diversification Opportunities for Lumentum Holdings and AdvanceTC

-0.06

Correlation Coefficient

Lumentum Holdings  AdvanceTC

Good diversification

The 3 months correlation between Lumentum and AdvanceTC is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and AdvanceTC Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvanceTC Limited and Lumentum Holdings 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 Lumentum Holdings are associated (or correlated) with AdvanceTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvanceTC Limited has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and AdvanceTC go up and down completely randomly.

Pair Corralation between Lumentum Holdings and AdvanceTC

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the AdvanceTC. But the stock apears to be less risky and, when comparing its historical volatility, Lumentum Holdings is 37.26 times less risky than AdvanceTC. The stock trades about 0.0 of its potential returns per unit of risk. The AdvanceTC Limited is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.11  in AdvanceTC Limited on November 20, 2024 and sell it today you would earn a total of  0.89  from holding AdvanceTC Limited or generate 809.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Lumentum Holdings  vs.  AdvanceTC Limited

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.

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.

Pair Trading with Lumentum Holdings and AdvanceTC

The main advantage of trading using opposite Lumentum Holdings and AdvanceTC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumentum Holdings position performs unexpectedly, AdvanceTC 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 AdvanceTC will offset losses from the drop in AdvanceTC's long position.

The idea behind Lumentum Holdings and AdvanceTC Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.