Correlation Between Power Integrations and NLIGHT
Can any of the company-specific risk be diversified away by investing in both Power Integrations 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 Power Integrations and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Integrations and nLIGHT Inc, you can compare the effects of market volatilities on Power Integrations 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 Power Integrations with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Integrations and NLIGHT.
Diversification Opportunities for Power Integrations and NLIGHT
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Power and NLIGHT is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Power Integrations and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Power Integrations 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 Power Integrations 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 Power Integrations i.e., Power Integrations and NLIGHT go up and down completely randomly.
Pair Corralation between Power Integrations and NLIGHT
Given the investment horizon of 90 days Power Integrations is expected to under-perform the NLIGHT. But the stock apears to be less risky and, when comparing its historical volatility, Power Integrations is 1.63 times less risky than NLIGHT. The stock trades about -0.02 of its potential returns per unit of risk. The nLIGHT Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,257 in nLIGHT Inc on November 2, 2024 and sell it today you would lose (121.50) from holding nLIGHT Inc or give up 9.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Integrations vs. nLIGHT Inc
Performance |
| Timeline |
| Power Integrations |
| nLIGHT Inc |
Power Integrations and NLIGHT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Integrations and NLIGHT
The main advantage of trading using opposite Power Integrations and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Integrations 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.| Power Integrations vs. Diodes Incorporated | Power Integrations vs. MACOM Technology Solutions | Power Integrations vs. Cirrus Logic | Power Integrations 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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