Correlation Between Wolfspeed and NLIGHT
Can any of the company-specific risk be diversified away by investing in both Wolfspeed 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 Wolfspeed and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wolfspeed and nLIGHT Inc, you can compare the effects of market volatilities on Wolfspeed 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 Wolfspeed with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wolfspeed and NLIGHT.
Diversification Opportunities for Wolfspeed and NLIGHT
Weak diversification
The 3 months correlation between Wolfspeed and NLIGHT is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Wolfspeed and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and Wolfspeed 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 Wolfspeed 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 Wolfspeed i.e., Wolfspeed and NLIGHT go up and down completely randomly.
Pair Corralation between Wolfspeed and NLIGHT
Given the investment horizon of 90 days Wolfspeed is expected to generate 2.16 times more return on investment than NLIGHT. However, Wolfspeed is 2.16 times more volatile than nLIGHT Inc. It trades about 0.0 of its potential returns per unit of risk. nLIGHT Inc is currently generating about -0.03 per unit of risk. If you would invest 2,903 in Wolfspeed on March 7, 2024 and sell it today you would lose (186.00) from holding Wolfspeed or give up 6.41% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Wolfspeed vs. nLIGHT Inc
Performance |
Timeline |
Wolfspeed |
nLIGHT Inc |
Wolfspeed and NLIGHT Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wolfspeed and NLIGHT
The main advantage of trading using opposite Wolfspeed and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wolfspeed 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.Wolfspeed vs. NXP Semiconductors NV | Wolfspeed vs. Analog Devices | Wolfspeed vs. Microchip Technology | Wolfspeed vs. Monolithic Power Systems |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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