Correlation Between Lumentum Holdings and Cambium Networks

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

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

Diversification Opportunities for Lumentum Holdings and Cambium Networks

0.53

Correlation Coefficient

Lumentum Holdings  Cambium Networks

Very weak diversification

The 3 months correlation between Lumentum and Cambium is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Cambium Networks Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambium Networks Corp 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 Cambium Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambium Networks Corp has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Cambium Networks go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Cambium Networks

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the Cambium Networks. But the stock apears to be less risky and, when comparing its historical volatility, Lumentum Holdings is 1.76 times less risky than Cambium Networks. The stock trades about -0.07 of its potential returns per unit of risk. The Cambium Networks Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Cambium Networks Corp on December 30, 2024 and sell it today you would lose (10.00) from holding Cambium Networks Corp or give up 12.5% of portfolio value over 90 days.

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

Lumentum Holdings  vs.  Cambium Networks Corp

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cambium Networks Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cambium Networks Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental drivers, Cambium Networks may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Lumentum Holdings and Cambium Networks

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

The idea behind Lumentum Holdings and Cambium Networks Corp 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.