Correlation Between Lumentum Holdings and Infinera

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

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

Diversification Opportunities for Lumentum Holdings and Infinera

-0.57

Correlation Coefficient

Lumentum Holdings  Infinera

Excellent diversification

The 3 months correlation between Lumentum and Infinera is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera 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 Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Infinera go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Infinera

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the Infinera. In addition to that, Lumentum Holdings is 16.21 times more volatile than Infinera. It trades about -0.07 of its total potential returns per unit of risk. Infinera is currently generating about 0.1 per unit of volatility. If you would invest  656.00  in Infinera on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Infinera or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	66.13%
Values	Daily Returns

Lumentum Holdings  vs.  Infinera

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.

Infinera

Risk-Adjusted Performance

OK

Over the last 90 days Infinera has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Lumentum Holdings and Infinera

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

The idea behind Lumentum Holdings and Infinera 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.