Correlation Between Lumentum Holdings and BOS Better

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

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

Diversification Opportunities for Lumentum Holdings and BOS Better

-0.29

Correlation Coefficient

Lumentum Holdings  BOS Better

Very good diversification

The 3 months correlation between Lumentum and BOS is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and BOS Better Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOS Better Online 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 BOS Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOS Better Online has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and BOS Better go up and down completely randomly.

Pair Corralation between Lumentum Holdings and BOS Better

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the BOS Better. In addition to that, Lumentum Holdings is 1.44 times more volatile than BOS Better Online. It trades about -0.03 of its total potential returns per unit of risk. BOS Better Online is currently generating about 0.09 per unit of volatility. If you would invest  329.00  in BOS Better Online on December 25, 2024 and sell it today you would earn a total of  56.00  from holding BOS Better Online or generate 17.02% return on investment over 90 days.

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

Lumentum Holdings  vs.  BOS Better Online

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

BOS Better Online

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOS Better Online are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, BOS Better exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumentum Holdings and BOS Better

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

The idea behind Lumentum Holdings and BOS Better Online 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.