Correlation Between TPT Global and Lumentum Holdings

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

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

Diversification Opportunities for TPT Global and Lumentum Holdings

-0.7

Correlation Coefficient

TPT Global  Lumentum Holdings

Excellent diversification

The 3 months correlation between TPT and Lumentum is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding TPT Global Tech and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and TPT Global 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 TPT Global Tech 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 TPT Global i.e., TPT Global and Lumentum Holdings go up and down completely randomly.

Pair Corralation between TPT Global and Lumentum Holdings

Given the investment horizon of 90 days TPT Global Tech is expected to generate 7.64 times more return on investment than Lumentum Holdings. However, TPT Global is 7.64 times more volatile than Lumentum Holdings. It trades about 0.16 of its potential returns per unit of risk. Lumentum Holdings is currently generating about -0.06 per unit of risk. If you would invest  0.01  in TPT Global Tech on December 27, 2024 and sell it today you would earn a total of  0.01  from holding TPT Global Tech or generate 100.0% return on investment over 90 days.

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

TPT Global Tech  vs.  Lumentum Holdings

TPT Global Tech

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TPT Global Tech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, TPT Global showed solid returns over the last few months and may actually be approaching a breakup point.

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 TPT Global and Lumentum Holdings

The main advantage of trading using opposite TPT Global and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPT Global 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 TPT Global Tech 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.