Correlation Between NLIGHT and Silicon Motion
Can any of the company-specific risk be diversified away by investing in both NLIGHT and Silicon Motion 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 Silicon Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nLIGHT Inc and Silicon Motion Technology, you can compare the effects of market volatilities on NLIGHT and Silicon Motion 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 Silicon Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and Silicon Motion.
Diversification Opportunities for NLIGHT and Silicon Motion
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NLIGHT and Silicon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Silicon Motion Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Motion Technology 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 Silicon Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Motion Technology has no effect on the direction of NLIGHT i.e., NLIGHT and Silicon Motion go up and down completely randomly.
Pair Corralation between NLIGHT and Silicon Motion
Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the Silicon Motion. In addition to that, NLIGHT is 2.27 times more volatile than Silicon Motion Technology. It trades about -0.08 of its total potential returns per unit of risk. Silicon Motion Technology is currently generating about 0.0 per unit of volatility. If you would invest 5,616 in Silicon Motion Technology on August 27, 2024 and sell it today you would lose (35.00) from holding Silicon Motion Technology or give up 0.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
nLIGHT Inc vs. Silicon Motion Technology
Performance |
| Timeline |
| nLIGHT Inc |
| Silicon Motion Technology |
NLIGHT and Silicon Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NLIGHT and Silicon Motion
The main advantage of trading using opposite NLIGHT and Silicon Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Silicon Motion 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 Silicon Motion will offset losses from the drop in Silicon Motion's long position.The idea behind nLIGHT Inc and Silicon Motion Technology 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.| Silicon Motion vs. ASE Industrial Holding | Silicon Motion vs. United Microelectronics | Silicon Motion vs. ChipMOS Technologies | Silicon Motion vs. SemiLEDS |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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