Correlation Between Lumentum Holdings and Calix

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

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

Diversification Opportunities for Lumentum Holdings and Calix

-0.65

Correlation Coefficient

Lumentum Holdings  Calix

Excellent diversification

The 3 months correlation between Lumentum and Calix is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Calix Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calix Inc 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 Calix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calix Inc has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Calix go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Calix

Given the investment horizon of 90 days Lumentum Holdings is expected to generate 1.09 times more return on investment than Calix. However, Lumentum Holdings is 1.09 times more volatile than Calix Inc. It trades about 0.23 of its potential returns per unit of risk. Calix Inc is currently generating about -0.05 per unit of risk. If you would invest  5,543  in Lumentum Holdings on September 4, 2024 and sell it today you would earn a total of  3,094  from holding Lumentum Holdings or generate 55.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Lumentum Holdings  vs.  Calix Inc

Lumentum Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Calix Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calix Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lumentum Holdings and Calix

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

The idea behind Lumentum Holdings and Calix Inc 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.