Correlation Between Lumentum Holdings and Gilat Satellite

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

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

Diversification Opportunities for Lumentum Holdings and Gilat Satellite

-0.26

Correlation Coefficient

Lumentum Holdings  Gilat Satellite

Very good diversification

The 3 months correlation between Lumentum and Gilat is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Gilat Satellite Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilat Satellite Networks 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 Gilat Satellite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilat Satellite Networks has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Gilat Satellite go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Gilat Satellite

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the Gilat Satellite. In addition to that, Lumentum Holdings is 1.5 times more volatile than Gilat Satellite Networks. It trades about -0.05 of its total potential returns per unit of risk. Gilat Satellite Networks is currently generating about 0.19 per unit of volatility. If you would invest  548.00  in Gilat Satellite Networks on November 29, 2024 and sell it today you would earn a total of  185.00  from holding Gilat Satellite Networks or generate 33.76% 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.  Gilat Satellite Networks

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

Gilat Satellite Networks

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gilat Satellite Networks are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Gilat Satellite unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lumentum Holdings and Gilat Satellite

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

The idea behind Lumentum Holdings and Gilat Satellite Networks 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.