Correlation Between Quantum and NLIGHT

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

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

Diversification Opportunities for Quantum and NLIGHT

-0.25

Correlation Coefficient

Quantum  NLIGHT

Very good diversification

The 3 months correlation between Quantum and NLIGHT is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Quantum and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Quantum 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 Quantum 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 Quantum i.e., Quantum and NLIGHT go up and down completely randomly.

Pair Corralation between Quantum and NLIGHT

Given the investment horizon of 90 days Quantum is expected to generate 5.89 times more return on investment than NLIGHT. However, Quantum is 5.89 times more volatile than nLIGHT Inc. It trades about 0.23 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.02 per unit of risk. If you would invest  325.00  in Quantum on September 22, 2024 and sell it today you would earn a total of  4,275  from holding Quantum or generate 1315.38% return on investment over 90 days.

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

Quantum  vs.  nLIGHT Inc

Quantum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Quantum and NLIGHT

The main advantage of trading using opposite Quantum and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantum 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 Quantum 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.