Correlation Between NLIGHT and Rambus

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

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

Diversification Opportunities for NLIGHT and Rambus

0.59

Correlation Coefficient

NLIGHT  Rambus

Very weak diversification

The 3 months correlation between NLIGHT and Rambus is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Rambus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rambus 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 Rambus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rambus Inc has no effect on the direction of NLIGHT i.e., NLIGHT and Rambus go up and down completely randomly.

Pair Corralation between NLIGHT and Rambus

Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the Rambus. In addition to that, NLIGHT is 1.04 times more volatile than Rambus Inc. It trades about -0.08 of its total potential returns per unit of risk. Rambus Inc is currently generating about 0.02 per unit of volatility. If you would invest  5,360  in Rambus Inc on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Rambus Inc or generate 0.19% return on investment over 90 days.

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

nLIGHT Inc  vs.  Rambus Inc

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Rambus Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rambus Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Rambus is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NLIGHT and Rambus

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

The idea behind nLIGHT Inc and Rambus 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.