Correlation Between Impinj and Lumentum Holdings

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

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

Diversification Opportunities for Impinj and Lumentum Holdings

0.8

Correlation Coefficient

Impinj  Lumentum Holdings

Very poor diversification

The 3 months correlation between Impinj and Lumentum is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Impinj Inc and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Impinj 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 Impinj Inc 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 Impinj i.e., Impinj and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Impinj and Lumentum Holdings

Allowing for the 90-day total investment horizon Impinj Inc is expected to under-perform the Lumentum Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Impinj Inc is 1.35 times less risky than Lumentum Holdings. The stock trades about -0.19 of its potential returns per unit of risk. The Lumentum Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. 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	Strong
Accuracy	100.0%
Values	Daily Returns

Impinj Inc  vs.  Lumentum Holdings

Impinj Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Impinj Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

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.

Pair Trading with Impinj and Lumentum Holdings

The main advantage of trading using opposite Impinj and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Impinj 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 Impinj Inc 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.