Correlation Between NLIGHT and Alpha
Can any of the company-specific risk be diversified away by investing in both NLIGHT and Alpha 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 NLIGHT and Alpha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nLIGHT Inc and Alpha and Omega, you can compare the effects of market volatilities on NLIGHT and Alpha 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 NLIGHT with a short position of Alpha. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and Alpha.
Diversification Opportunities for NLIGHT and Alpha
Good diversification
The 3 months correlation between NLIGHT and Alpha is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and NLIGHT 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 nLIGHT Inc are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of NLIGHT i.e., NLIGHT and Alpha go up and down completely randomly.
Pair Corralation between NLIGHT and Alpha
Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the Alpha. But the stock apears to be less risky and, when comparing its historical volatility, nLIGHT Inc is 1.22 times less risky than Alpha. The stock trades about -0.01 of its potential returns per unit of risk. The Alpha and Omega is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,971 in Alpha and Omega on August 24, 2024 and sell it today you would earn a total of 1,069 from holding Alpha and Omega or generate 35.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
nLIGHT Inc vs. Alpha and Omega
Performance |
| Timeline |
| nLIGHT Inc |
| Alpha and Omega |
NLIGHT and Alpha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NLIGHT and Alpha
The main advantage of trading using opposite NLIGHT and Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Alpha 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 Alpha will offset losses from the drop in Alpha's long position.| NLIGHT vs. NVIDIA | NLIGHT vs. Taiwan Semiconductor Manufacturing | NLIGHT vs. Marvell Technology Group | NLIGHT vs. Micron Technology |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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