Correlation Between NLIGHT and IONQ

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

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

Diversification Opportunities for NLIGHT and IONQ

-0.13

Correlation Coefficient

NLIGHT  IONQ

Good diversification

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

Pair Corralation between NLIGHT and IONQ

Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the IONQ. But the stock apears to be less risky and, when comparing its historical volatility, nLIGHT Inc is 3.38 times less risky than IONQ. The stock trades about -0.15 of its potential returns per unit of risk. The IONQ Inc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,278  in IONQ Inc on September 22, 2024 and sell it today you would earn a total of  1,164  from holding IONQ Inc or generate 35.51% return on investment over 90 days.

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

nLIGHT Inc  vs.  IONQ Inc

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

IONQ Inc

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IONQ Inc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, IONQ reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NLIGHT and IONQ

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

The idea behind nLIGHT Inc and IONQ 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 Global Correlations module to find global opportunities by holding instruments from different markets.