Correlation Between Passage Bio and Lumentum Holdings

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

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

Diversification Opportunities for Passage Bio and Lumentum Holdings

0.32

Correlation Coefficient

Passage Bio  Lumentum Holdings

Weak diversification

The 3 months correlation between Passage and Lumentum is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Passage Bio 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 Passage Bio are associated (or correlated) with Lumentum Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumentum Holdings has no effect on the direction of Passage Bio i.e., Passage Bio and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Passage Bio and Lumentum Holdings

Given the investment horizon of 90 days Passage Bio is expected to generate 20.81 times less return on investment than Lumentum Holdings. In addition to that, Passage Bio is 2.44 times more volatile than Lumentum Holdings. It trades about 0.0 of its total potential returns per unit of risk. Lumentum Holdings is currently generating about 0.14 per unit of volatility. If you would invest  4,758  in Lumentum Holdings on September 21, 2024 and sell it today you would earn a total of  3,598  from holding Lumentum Holdings or generate 75.62% return on investment over 90 days.

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

Passage Bio  vs.  Lumentum Holdings

Passage Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

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 fragile basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Passage Bio and Lumentum Holdings

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

The idea behind Passage Bio and Lumentum Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.