Correlation Between Emerson Radio and NLIGHT
Can any of the company-specific risk be diversified away by investing in both Emerson Radio and NLIGHT 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 Emerson Radio and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emerson Radio and nLIGHT Inc, you can compare the effects of market volatilities on Emerson Radio and NLIGHT 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 Emerson Radio with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emerson Radio and NLIGHT.
Diversification Opportunities for Emerson Radio and NLIGHT
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emerson and NLIGHT is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Emerson Radio and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Emerson Radio 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 Emerson Radio are associated (or correlated) with NLIGHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nLIGHT Inc has no effect on the direction of Emerson Radio i.e., Emerson Radio and NLIGHT go up and down completely randomly.
Pair Corralation between Emerson Radio and NLIGHT
Considering the 90-day investment horizon Emerson Radio is expected to generate 3.36 times less return on investment than NLIGHT. But when comparing it to its historical volatility, Emerson Radio is 1.12 times less risky than NLIGHT. It trades about 0.0 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,354 in nLIGHT Inc on November 6, 2024 and sell it today you would lose (237.00) from holding nLIGHT Inc or give up 17.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Emerson Radio vs. nLIGHT Inc
Performance |
| Timeline |
| Emerson Radio |
| nLIGHT Inc |
Emerson Radio and NLIGHT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emerson Radio and NLIGHT
The main advantage of trading using opposite Emerson Radio and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emerson Radio position performs unexpectedly, NLIGHT 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 NLIGHT will offset losses from the drop in NLIGHT's long position.| Emerson Radio vs. VOXX International | Emerson Radio vs. LG Display Co | Emerson Radio vs. Koss Corporation | Emerson Radio vs. Wearable Devices |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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