Correlation Between Zebra Technologies and Lumentum Holdings

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

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

Diversification Opportunities for Zebra Technologies and Lumentum Holdings

0.92

Correlation Coefficient

Zebra Technologies  Lumentum Holdings

Almost no diversification

The 3 months correlation between Zebra and Lumentum is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Zebra Technologies and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Zebra Technologies 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 Zebra Technologies 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 Zebra Technologies i.e., Zebra Technologies and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Zebra Technologies and Lumentum Holdings

Given the investment horizon of 90 days Zebra Technologies is expected to under-perform the Lumentum Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Zebra Technologies is 2.35 times less risky than Lumentum Holdings. The stock trades about -0.23 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Zebra Technologies  vs.  Lumentum Holdings

Zebra Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zebra Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Zebra Technologies and Lumentum Holdings

The main advantage of trading using opposite Zebra Technologies and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zebra Technologies 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 Zebra Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.