Correlation Between Alignment Healthcare and Lumentum Holdings

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

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

Diversification Opportunities for Alignment Healthcare and Lumentum Holdings

-0.9

Correlation Coefficient

Alignment Healthcare  Lumentum Holdings

Pay attention - limited upside

The 3 months correlation between Alignment and Lumentum is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alignment Healthcare LLC and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings and Alignment Healthcare 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 Alignment Healthcare LLC 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 Alignment Healthcare i.e., Alignment Healthcare and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Alignment Healthcare and Lumentum Holdings

Given the investment horizon of 90 days Alignment Healthcare LLC is expected to under-perform the Lumentum Holdings. In addition to that, Alignment Healthcare is 1.22 times more volatile than Lumentum Holdings. It trades about -0.08 of its total potential returns per unit of risk. Lumentum Holdings is currently generating about 0.34 per unit of volatility. If you would invest  6,317  in Lumentum Holdings on May 4, 2025 and sell it today you would earn a total of  4,351  from holding Lumentum Holdings or generate 68.88% return on investment over 90 days.

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

Alignment Healthcare LLC  vs.  Lumentum Holdings

Alignment Healthcare LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alignment Healthcare LLC 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 technical indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lumentum Holdings

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alignment Healthcare and Lumentum Holdings

The main advantage of trading using opposite Alignment Healthcare and Lumentum Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alignment Healthcare 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 Alignment Healthcare LLC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.