Correlation Between NLIGHT and GSI Technology

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

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

Diversification Opportunities for NLIGHT and GSI Technology

0.16

Correlation Coefficient

NLIGHT  GSI Technology

Average diversification

The 3 months correlation between NLIGHT and GSI is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and GSI Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GSI Technology 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 GSI Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GSI Technology has no effect on the direction of NLIGHT i.e., NLIGHT and GSI Technology go up and down completely randomly.

Pair Corralation between NLIGHT and GSI Technology

Given the investment horizon of 90 days NLIGHT is expected to generate 4.79 times less return on investment than GSI Technology. In addition to that, NLIGHT is 1.02 times more volatile than GSI Technology. It trades about 0.02 of its total potential returns per unit of risk. GSI Technology is currently generating about 0.09 per unit of volatility. If you would invest  263.00  in GSI Technology on September 2, 2024 and sell it today you would earn a total of  67.00  from holding GSI Technology or generate 25.48% return on investment over 90 days.

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

nLIGHT Inc  vs.  GSI Technology

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

GSI Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GSI Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, GSI Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NLIGHT and GSI Technology

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

The idea behind nLIGHT Inc and GSI Technology 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..