Correlation Between NLIGHT and ON Semiconductor

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

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

Diversification Opportunities for NLIGHT and ON Semiconductor

-0.01

Correlation Coefficient

NLIGHT  ON Semiconductor

Good diversification

The 3 months correlation between NLIGHT and ON Semiconductor is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor 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 ON Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON Semiconductor has no effect on the direction of NLIGHT i.e., NLIGHT and ON Semiconductor go up and down completely randomly.

Pair Corralation between NLIGHT and ON Semiconductor

Given the investment horizon of 90 days nLIGHT Inc is expected to generate 1.09 times more return on investment than ON Semiconductor. However, NLIGHT is 1.09 times more volatile than ON Semiconductor. It trades about -0.04 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.17 per unit of risk. If you would invest  1,086  in nLIGHT Inc on November 28, 2024 and sell it today you would lose (110.00) 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.  ON Semiconductor

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.

ON Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days ON Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NLIGHT and ON Semiconductor

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

The idea behind nLIGHT Inc and ON Semiconductor 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.