Correlation Between Rohm Co and NLIGHT

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

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

Diversification Opportunities for Rohm Co and NLIGHT

0.45

Correlation Coefficient

Rohm Co  NLIGHT

Very weak diversification

The 3 months correlation between Rohm and NLIGHT is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Rohm Co Ltd and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Rohm Co 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 Rohm Co Ltd 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 Rohm Co i.e., Rohm Co and NLIGHT go up and down completely randomly.

Pair Corralation between Rohm Co and NLIGHT

Assuming the 90 days horizon Rohm Co Ltd is expected to generate 0.46 times more return on investment than NLIGHT. However, Rohm Co Ltd is 2.17 times less risky than NLIGHT. It trades about -0.19 of its potential returns per unit of risk. nLIGHT Inc is currently generating about -0.12 per unit of risk. If you would invest  1,116  in Rohm Co Ltd on October 7, 2024 and sell it today you would lose (179.00) from holding Rohm Co Ltd or give up 16.04% of portfolio value over 90 days.

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

Rohm Co Ltd  vs.  nLIGHT Inc

Rohm Co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rohm Co Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 weak basic indicators, NLIGHT may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Rohm Co and NLIGHT

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

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..