Correlation Between Cirrus Logic and NLIGHT

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

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

Diversification Opportunities for Cirrus Logic and NLIGHT

-0.03

Correlation Coefficient

Cirrus Logic  NLIGHT

Good diversification

The 3 months correlation between Cirrus and NLIGHT is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cirrus Logic and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Cirrus Logic 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 Cirrus Logic 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 Cirrus Logic i.e., Cirrus Logic and NLIGHT go up and down completely randomly.

Pair Corralation between Cirrus Logic and NLIGHT

Given the investment horizon of 90 days Cirrus Logic is expected to generate 0.62 times more return on investment than NLIGHT. However, Cirrus Logic is 1.62 times less risky than NLIGHT. It trades about 0.04 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.02 per unit of risk. If you would invest  7,240  in Cirrus Logic on September 23, 2024 and sell it today you would earn a total of  2,816  from holding Cirrus Logic or generate 38.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cirrus Logic  vs.  nLIGHT Inc

Cirrus Logic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cirrus Logic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

nLIGHT Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in nLIGHT Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, NLIGHT is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cirrus Logic and NLIGHT

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

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.