Correlation Between NetApp and LightPath Technologies
Can any of the company-specific risk be diversified away by investing in both NetApp and LightPath Technologies 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 NetApp and LightPath Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetApp Inc and LightPath Technologies, you can compare the effects of market volatilities on NetApp and LightPath Technologies 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 NetApp with a short position of LightPath Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetApp and LightPath Technologies.
Diversification Opportunities for NetApp and LightPath Technologies
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NetApp and LightPath is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and LightPath Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LightPath Technologies and NetApp 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 NetApp Inc are associated (or correlated) with LightPath Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LightPath Technologies has no effect on the direction of NetApp i.e., NetApp and LightPath Technologies go up and down completely randomly.
Pair Corralation between NetApp and LightPath Technologies
Given the investment horizon of 90 days NetApp is expected to generate 1.35 times less return on investment than LightPath Technologies. But when comparing it to its historical volatility, NetApp Inc is 6.05 times less risky than LightPath Technologies. It trades about 0.32 of its potential returns per unit of risk. LightPath Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 310.00 in LightPath Technologies on October 26, 2024 and sell it today you would earn a total of 16.50 from holding LightPath Technologies or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NetApp Inc vs. LightPath Technologies
Performance |
| Timeline |
| NetApp Inc |
| LightPath Technologies |
NetApp and LightPath Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetApp and LightPath Technologies
The main advantage of trading using opposite NetApp and LightPath Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp position performs unexpectedly, LightPath Technologies 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 LightPath Technologies will offset losses from the drop in LightPath Technologies' long position.The idea behind NetApp Inc and LightPath Technologies 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.| LightPath Technologies vs. Methode Electronics | LightPath Technologies vs. OSI Systems | LightPath Technologies vs. Plexus Corp | LightPath Technologies vs. CTS Corporation |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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