Correlation Between Silicon Laboratories and NLIGHT
Can any of the company-specific risk be diversified away by investing in both Silicon Laboratories 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 Silicon Laboratories and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicon Laboratories and nLIGHT Inc, you can compare the effects of market volatilities on Silicon Laboratories 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 Silicon Laboratories with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Laboratories and NLIGHT.
Diversification Opportunities for Silicon Laboratories and NLIGHT
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Silicon and NLIGHT is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Laboratories and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Silicon Laboratories 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 Silicon Laboratories 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 Silicon Laboratories i.e., Silicon Laboratories and NLIGHT go up and down completely randomly.
Pair Corralation between Silicon Laboratories and NLIGHT
Given the investment horizon of 90 days Silicon Laboratories is expected to generate 0.61 times more return on investment than NLIGHT. However, Silicon Laboratories is 1.63 times less risky than NLIGHT. It trades about -0.07 of its potential returns per unit of risk. nLIGHT Inc is currently generating about -0.1 per unit of risk. If you would invest 11,771 in Silicon Laboratories on August 30, 2024 and sell it today you would lose (893.00) from holding Silicon Laboratories or give up 7.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicon Laboratories vs. nLIGHT Inc
Performance |
| Timeline |
| Silicon Laboratories |
| nLIGHT Inc |
Silicon Laboratories and NLIGHT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicon Laboratories and NLIGHT
The main advantage of trading using opposite Silicon Laboratories and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Laboratories 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.| Silicon Laboratories vs. First Solar | Silicon Laboratories vs. Sunrun Inc | Silicon Laboratories vs. Canadian Solar | Silicon Laboratories vs. SolarEdge Technologies |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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