Correlation Between Lumentum Holdings and Zebra Technologies

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

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

Diversification Opportunities for Lumentum Holdings and Zebra Technologies

0.9

Correlation Coefficient

Lumentum Holdings  Zebra Technologies

Almost no diversification

The 3 months correlation between Lumentum and Zebra is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Zebra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zebra Technologies 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 Zebra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zebra Technologies has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Zebra Technologies go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Zebra Technologies

Given the investment horizon of 90 days Lumentum Holdings is expected to generate 2.35 times more return on investment than Zebra Technologies. However, Lumentum Holdings is 2.35 times more volatile than Zebra Technologies. It trades about -0.07 of its potential returns per unit of risk. Zebra Technologies is currently generating about -0.22 per unit of risk. If you would invest  8,384  in Lumentum Holdings on December 29, 2024 and sell it today you would lose (2,126) from holding Lumentum Holdings or give up 25.36% of portfolio value over 90 days.

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

Lumentum Holdings  vs.  Zebra Technologies

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.

Zebra Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zebra Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lumentum Holdings and Zebra Technologies

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

The idea behind Lumentum Holdings and Zebra Technologies 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.