Correlation Between NLIGHT and Wolfspeed
Can any of the company-specific risk be diversified away by investing in both NLIGHT and Wolfspeed 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 Wolfspeed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nLIGHT Inc and Wolfspeed, you can compare the effects of market volatilities on NLIGHT and Wolfspeed 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 Wolfspeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and Wolfspeed.
Diversification Opportunities for NLIGHT and Wolfspeed
Very weak diversification
The 3 months correlation between NLIGHT and Wolfspeed is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Wolfspeed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wolfspeed 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 Wolfspeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wolfspeed has no effect on the direction of NLIGHT i.e., NLIGHT and Wolfspeed go up and down completely randomly.
Pair Corralation between NLIGHT and Wolfspeed
Given the investment horizon of 90 days nLIGHT Inc is expected to generate 0.53 times more return on investment than Wolfspeed. However, nLIGHT Inc is 1.88 times less risky than Wolfspeed. It trades about -0.01 of its potential returns per unit of risk. Wolfspeed is currently generating about -0.04 per unit of risk. If you would invest 1,468 in nLIGHT Inc on August 31, 2024 and sell it today you would lose (382.00) from holding nLIGHT Inc or give up 26.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
nLIGHT Inc vs. Wolfspeed
Performance |
| Timeline |
| nLIGHT Inc |
| Wolfspeed |
NLIGHT and Wolfspeed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NLIGHT and Wolfspeed
The main advantage of trading using opposite NLIGHT and Wolfspeed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Wolfspeed 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 Wolfspeed will offset losses from the drop in Wolfspeed's long position.The idea behind nLIGHT Inc and Wolfspeed 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.| Wolfspeed vs. NXP Semiconductors NV | Wolfspeed vs. Analog Devices | Wolfspeed vs. Microchip Technology | Wolfspeed vs. Monolithic Power Systems |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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