Correlation Between MACOM Technology and NLIGHT
Can any of the company-specific risk be diversified away by investing in both MACOM Technology 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 MACOM Technology and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MACOM Technology Solutions and nLIGHT Inc, you can compare the effects of market volatilities on MACOM Technology 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 MACOM Technology with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of MACOM Technology and NLIGHT.
Diversification Opportunities for MACOM Technology and NLIGHT
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MACOM and NLIGHT is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding MACOM Technology Solutions and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and MACOM Technology 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 MACOM Technology Solutions 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 MACOM Technology i.e., MACOM Technology and NLIGHT go up and down completely randomly.
Pair Corralation between MACOM Technology and NLIGHT
Given the investment horizon of 90 days MACOM Technology is expected to generate 1.41 times less return on investment than NLIGHT. But when comparing it to its historical volatility, MACOM Technology Solutions is 1.69 times less risky than NLIGHT. It trades about 0.18 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,009 in nLIGHT Inc on October 21, 2024 and sell it today you would earn a total of 101.00 from holding nLIGHT Inc or generate 10.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MACOM Technology Solutions vs. nLIGHT Inc
Performance |
| Timeline |
| MACOM Technology Sol |
| nLIGHT Inc |
MACOM Technology and NLIGHT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MACOM Technology and NLIGHT
The main advantage of trading using opposite MACOM Technology and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MACOM Technology 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.| MACOM Technology vs. Power Integrations | MACOM Technology vs. Diodes Incorporated | MACOM Technology vs. Cirrus Logic | MACOM Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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