Correlation Between Vertiv Holdings and Lumen Technologies

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

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

Diversification Opportunities for Vertiv Holdings and Lumen Technologies

0.73

Correlation Coefficient

Vertiv Holdings  Lumen Technologies

Poor diversification

The 3 months correlation between Vertiv and Lumen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vertiv Holdings Co and Lumen Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumen Technologies and Vertiv 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 Vertiv Holdings Co are associated (or correlated) with Lumen Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumen Technologies has no effect on the direction of Vertiv Holdings i.e., Vertiv Holdings and Lumen Technologies go up and down completely randomly.

Pair Corralation between Vertiv Holdings and Lumen Technologies

Considering the 90-day investment horizon Vertiv Holdings Co is expected to generate 0.66 times more return on investment than Lumen Technologies. However, Vertiv Holdings Co is 1.51 times less risky than Lumen Technologies. It trades about 0.27 of its potential returns per unit of risk. Lumen Technologies is currently generating about 0.16 per unit of risk. If you would invest  7,518  in Vertiv Holdings Co on September 2, 2024 and sell it today you would earn a total of  5,242  from holding Vertiv Holdings Co or generate 69.73% return on investment over 90 days.

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

Vertiv Holdings Co  vs.  Lumen Technologies

Vertiv Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vertiv Holdings Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vertiv Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Lumen Technologies

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Vertiv Holdings and Lumen Technologies

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

The idea behind Vertiv Holdings Co and Lumen 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.