Correlation Between Lumentum Holdings and Universal Security

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

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

Diversification Opportunities for Lumentum Holdings and Universal Security

0.89

Correlation Coefficient

Lumentum Holdings  Universal Security

Very poor diversification

The 3 months correlation between Lumentum and Universal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Universal Security Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Security 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 Universal Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Security has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Universal Security go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Universal Security

Given the investment horizon of 90 days Lumentum Holdings is expected to under-perform the Universal Security. In addition to that, Lumentum Holdings is 2.0 times more volatile than Universal Security Instruments. It trades about -0.05 of its total potential returns per unit of risk. Universal Security Instruments is currently generating about -0.09 per unit of volatility. If you would invest  223.00  in Universal Security Instruments on December 21, 2024 and sell it today you would lose (29.00) from holding Universal Security Instruments or give up 13.0% of portfolio value over 90 days.

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

Lumentum Holdings  vs.  Universal Security Instruments

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.

Universal Security

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Security Instruments 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lumentum Holdings and Universal Security

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

The idea behind Lumentum Holdings and Universal Security Instruments 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.