Correlation Between Lumentum Holdings and Nokia Corp

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

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

Diversification Opportunities for Lumentum Holdings and Nokia Corp

-0.61

Correlation Coefficient

Lumentum Holdings  Nokia Corp

Excellent diversification

The 3 months correlation between Lumentum and Nokia is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Lumentum Holdings and Nokia Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia Corp ADR and Lumentum 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 Lumentum Holdings are associated (or correlated) with Nokia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia Corp ADR has no effect on the direction of Lumentum Holdings i.e., Lumentum Holdings and Nokia Corp go up and down completely randomly.

Pair Corralation between Lumentum Holdings and Nokia Corp

Given the investment horizon of 90 days Lumentum Holdings is expected to generate 1.76 times more return on investment than Nokia Corp. However, Lumentum Holdings is 1.76 times more volatile than Nokia Corp ADR. It trades about 0.35 of its potential returns per unit of risk. Nokia Corp ADR is currently generating about -0.2 per unit of risk. If you would invest  6,442  in Lumentum Holdings on May 6, 2025 and sell it today you would earn a total of  4,671  from holding Lumentum Holdings or generate 72.51% return on investment over 90 days.

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

Lumentum Holdings  vs.  Nokia Corp ADR

Lumentum Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 27 (%) 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.

Nokia Corp ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nokia Corp ADR 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 basic indicators remain quite persistent which may send shares a bit higher in September 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Lumentum Holdings and Nokia Corp

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

The idea behind Lumentum Holdings and Nokia Corp ADR 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.