Correlation Between GSI Technology and NLIGHT

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

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

Diversification Opportunities for GSI Technology and NLIGHT

-0.27

Correlation Coefficient

GSI Technology  NLIGHT

Very good diversification

The 3 months correlation between GSI and NLIGHT is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GSI Technology and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and GSI Technology 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 GSI Technology 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 GSI Technology i.e., GSI Technology and NLIGHT go up and down completely randomly.

Pair Corralation between GSI Technology and NLIGHT

Given the investment horizon of 90 days GSI Technology is expected to under-perform the NLIGHT. In addition to that, GSI Technology is 1.47 times more volatile than nLIGHT Inc. It trades about -0.27 of its total potential returns per unit of risk. nLIGHT Inc is currently generating about -0.09 per unit of volatility. If you would invest  1,262  in nLIGHT Inc on March 7, 2024 and sell it today you would lose (49.00) from holding nLIGHT Inc or give up 3.88% of portfolio value over 90 days.

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

GSI Technology  vs.  nLIGHT Inc

GSI Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSI Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

nLIGHT Inc

Risk-Adjusted Performance

0 of 100

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 relatively invariable basic indicators, NLIGHT is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GSI Technology and NLIGHT

The main advantage of trading using opposite GSI Technology and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSI Technology 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 GSI Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.