Correlation Between NLIGHT and Alpha

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

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

Diversification Opportunities for NLIGHT and Alpha

-0.13

Correlation Coefficient

NLIGHT  Alpha

Good diversification

The 3 months correlation between NLIGHT and Alpha is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega and NLIGHT 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 nLIGHT Inc are associated (or correlated) with Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of NLIGHT i.e., NLIGHT and Alpha go up and down completely randomly.

Pair Corralation between NLIGHT and Alpha

Given the investment horizon of 90 days nLIGHT Inc is expected to generate 0.85 times more return on investment than Alpha. However, nLIGHT Inc is 1.18 times less risky than Alpha. It trades about 0.0 of its potential returns per unit of risk. Alpha and Omega is currently generating about -0.01 per unit of risk. If you would invest  1,194  in nLIGHT Inc on August 30, 2024 and sell it today you would lose (121.00) from holding nLIGHT Inc or give up 10.13% of portfolio value over 90 days.

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

nLIGHT Inc  vs.  Alpha and Omega

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Alpha and Omega

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alpha is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with NLIGHT and Alpha

The main advantage of trading using opposite NLIGHT and Alpha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Alpha 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 Alpha will offset losses from the drop in Alpha's long position.

The idea behind nLIGHT Inc and Alpha and Omega 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.