Correlation Between CEVA and NLIGHT

Can any of the company-specific risk be diversified away by investing in both CEVA 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 CEVA and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CEVA Inc and nLIGHT Inc, you can compare the effects of market volatilities on CEVA 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 CEVA with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEVA and NLIGHT.

Diversification Opportunities for CEVA and NLIGHT

-0.06

Correlation Coefficient

CEVA  NLIGHT

Good diversification

The 3 months correlation between CEVA and NLIGHT is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CEVA Inc and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and CEVA 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 CEVA Inc 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 CEVA i.e., CEVA and NLIGHT go up and down completely randomly.

Pair Corralation between CEVA and NLIGHT

Given the investment horizon of 90 days CEVA Inc is expected to generate 1.85 times more return on investment than NLIGHT. However, CEVA is 1.85 times more volatile than nLIGHT Inc. It trades about 0.22 of its potential returns per unit of risk. nLIGHT Inc is currently generating about -0.27 per unit of risk. If you would invest  3,170  in CEVA Inc on November 28, 2024 and sell it today you would earn a total of  668.00  from holding CEVA Inc or generate 21.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CEVA Inc  vs.  nLIGHT Inc

CEVA Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CEVA Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CEVA sustained solid returns over the last few months and may actually be approaching a breakup point.

nLIGHT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days nLIGHT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with CEVA and NLIGHT

The main advantage of trading using opposite CEVA and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEVA 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.

The idea behind CEVA Inc and nLIGHT Inc 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.