Correlation Between NLIGHT and Power Integrations
Can any of the company-specific risk be diversified away by investing in both NLIGHT and Power Integrations 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 Power Integrations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nLIGHT Inc and Power Integrations, you can compare the effects of market volatilities on NLIGHT and Power Integrations 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 Power Integrations. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and Power Integrations.
Diversification Opportunities for NLIGHT and Power Integrations
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between NLIGHT and Power is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Power Integrations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Integrations 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 Power Integrations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Integrations has no effect on the direction of NLIGHT i.e., NLIGHT and Power Integrations go up and down completely randomly.
Pair Corralation between NLIGHT and Power Integrations
Given the investment horizon of 90 days nLIGHT Inc is expected to generate 1.63 times more return on investment than Power Integrations. However, NLIGHT is 1.63 times more volatile than Power Integrations. It trades about 0.01 of its potential returns per unit of risk. Power Integrations is currently generating about -0.02 per unit of risk. If you would invest 1,257 in nLIGHT Inc on November 2, 2024 and sell it today you would lose (121.50) from holding nLIGHT Inc or give up 9.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
nLIGHT Inc vs. Power Integrations
Performance |
| Timeline |
| nLIGHT Inc |
| Power Integrations |
NLIGHT and Power Integrations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NLIGHT and Power Integrations
The main advantage of trading using opposite NLIGHT and Power Integrations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Power Integrations 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 Power Integrations will offset losses from the drop in Power Integrations' long position.The idea behind nLIGHT Inc and Power Integrations 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.| Power Integrations vs. Diodes Incorporated | Power Integrations vs. MACOM Technology Solutions | Power Integrations vs. Cirrus Logic | Power Integrations vs. Amkor 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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