Correlation Between Lumentum Holdings and AudioCodes

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

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

Diversification Opportunities for Lumentum Holdings and AudioCodes

0.04

Correlation Coefficient

Lumentum Holdings  AudioCodes

Significant diversification

The 3 months correlation between Lumentum and AudioCodes is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and AudioCodes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AudioCodes 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 AudioCodes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AudioCodes has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and AudioCodes go up and down completely randomly.

Pair Corralation between Lumentum Holdings and AudioCodes

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the AudioCodes. In addition to that, Lumentum Holdings is 2.03 times more volatile than AudioCodes. It trades about -0.07 of its total potential returns per unit of risk. AudioCodes is currently generating about 0.01 per unit of volatility. 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

Lumentum Holdings  vs.  AudioCodes

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.

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.

Pair Trading with Lumentum Holdings and AudioCodes

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

The idea behind Lumentum Holdings and AudioCodes 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.