Correlation Between Lumentum Holdings and Global Blockchain

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

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

Diversification Opportunities for Lumentum Holdings and Global Blockchain

0.58

Correlation Coefficient

Lumentum Holdings  Global Blockchain

Very weak diversification

The 3 months correlation between Lumentum and Global is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Global Blockchain Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Blockchain 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 Global Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Blockchain has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Global Blockchain go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Global Blockchain

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the Global Blockchain. But the stock apears to be less risky and, when comparing its historical volatility, Lumentum Holdings is 2.2 times less risky than Global Blockchain. The stock trades about -0.02 of its potential returns per unit of risk. The Global Blockchain Acquisition is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Global Blockchain Acquisition on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Global Blockchain Acquisition or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.0%
Values	Daily Returns

Lumentum Holdings  vs.  Global Blockchain Acquisition

Lumentum Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Global Blockchain

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Blockchain Acquisition are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward-looking signals, Global Blockchain reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumentum Holdings and Global Blockchain

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

The idea behind Lumentum Holdings and Global Blockchain Acquisition 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.