Correlation Between Franklin Wireless and NLIGHT

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

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

Diversification Opportunities for Franklin Wireless and NLIGHT

-0.36

Correlation Coefficient

Franklin Wireless  NLIGHT

Very good diversification

The 3 months correlation between Franklin and NLIGHT is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Franklin Wireless Corp and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Franklin Wireless 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 Franklin Wireless Corp 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 Franklin Wireless i.e., Franklin Wireless and NLIGHT go up and down completely randomly.

Pair Corralation between Franklin Wireless and NLIGHT

Given the investment horizon of 90 days Franklin Wireless Corp is expected to generate 0.72 times more return on investment than NLIGHT. However, Franklin Wireless Corp is 1.39 times less risky than NLIGHT. It trades about 0.07 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.02 per unit of risk. If you would invest  318.00  in Franklin Wireless Corp on October 4, 2024 and sell it today you would earn a total of  175.00  from holding Franklin Wireless Corp or generate 55.03% return on investment over 90 days.

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

Franklin Wireless Corp  vs.  nLIGHT Inc

Franklin Wireless Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Wireless Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Franklin Wireless may actually be approaching a critical reversion point that can send shares even higher in February 2025.

nLIGHT Inc

Risk-Adjusted Performance

0 of 100

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 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 Franklin Wireless and NLIGHT

The main advantage of trading using opposite Franklin Wireless and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franklin Wireless 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 Franklin Wireless Corp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.