Correlation Between Network 1 and NLIGHT
Can any of the company-specific risk be diversified away by investing in both Network 1 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 Network 1 and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Network 1 Technologies and nLIGHT Inc, you can compare the effects of market volatilities on Network 1 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 Network 1 with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network 1 and NLIGHT.
Diversification Opportunities for Network 1 and NLIGHT
Modest diversification
The 3 months correlation between Network and NLIGHT is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Network 1 Technologies and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Network 1 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 Network 1 Technologies 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 Network 1 i.e., Network 1 and NLIGHT go up and down completely randomly.
Pair Corralation between Network 1 and NLIGHT
Given the investment horizon of 90 days Network 1 Technologies is expected to generate 0.48 times more return on investment than NLIGHT. However, Network 1 Technologies is 2.07 times less risky than NLIGHT. It trades about 0.03 of its potential returns per unit of risk. nLIGHT Inc is currently generating about -0.19 per unit of risk. If you would invest 138.00 in Network 1 Technologies on November 18, 2024 and sell it today you would earn a total of 1.00 from holding Network 1 Technologies or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Network 1 Technologies vs. nLIGHT Inc
Performance |
| Timeline |
| Network 1 Technologies |
| nLIGHT Inc |
Network 1 and NLIGHT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Network 1 and NLIGHT
The main advantage of trading using opposite Network 1 and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network 1 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.| Network 1 vs. Civeo Corp | Network 1 vs. BrightView Holdings | Network 1 vs. Maximus | Network 1 vs. CBIZ Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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