Correlation Between Lumentum Holdings and Zepp Health

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

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

Diversification Opportunities for Lumentum Holdings and Zepp Health

-0.77

Correlation Coefficient

Lumentum Holdings  Zepp Health

Pay attention - limited upside

The 3 months correlation between Lumentum and Zepp is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Zepp Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zepp Health Corp 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 Zepp Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zepp Health Corp has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Zepp Health go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Zepp Health

Given the investment horizon of 90 days Lumentum Holdings is expected to generate 0.65 times more return on investment than Zepp Health. However, Lumentum Holdings is 1.55 times less risky than Zepp Health. It trades about 0.15 of its potential returns per unit of risk. Zepp Health Corp is currently generating about 0.01 per unit of risk. If you would invest  4,400  in Lumentum Holdings on October 9, 2024 and sell it today you would earn a total of  4,644  from holding Lumentum Holdings or generate 105.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.39%
Values	Daily Returns

Lumentum Holdings  vs.  Zepp Health Corp

Lumentum Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 12 (%) 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.

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Zepp Health is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lumentum Holdings and Zepp Health

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

The idea behind Lumentum Holdings and Zepp Health Corp 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.