Correlation Between Evertec and Nextnav Acquisition

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

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

Diversification Opportunities for Evertec and Nextnav Acquisition

0.7

Correlation Coefficient

Evertec  Nextnav Acquisition

Poor diversification

The 3 months correlation between Evertec and Nextnav is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Evertec and Nextnav Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextnav Acquisition Corp and Evertec 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 Evertec are associated (or correlated) with Nextnav Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextnav Acquisition Corp has no effect on the direction of Evertec i.e., Evertec and Nextnav Acquisition go up and down completely randomly.

Pair Corralation between Evertec and Nextnav Acquisition

Given the investment horizon of 90 days Evertec is expected to generate 4.29 times less return on investment than Nextnav Acquisition. But when comparing it to its historical volatility, Evertec is 1.95 times less risky than Nextnav Acquisition. It trades about 0.23 of its potential returns per unit of risk. Nextnav Acquisition Corp is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest  1,162  in Nextnav Acquisition Corp on September 1, 2024 and sell it today you would earn a total of  577.00  from holding Nextnav Acquisition Corp or generate 49.66% return on investment over 90 days.

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

Evertec  vs.  Nextnav Acquisition Corp

Evertec

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Evertec are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Evertec may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Nextnav Acquisition Corp

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Nextnav Acquisition displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evertec and Nextnav Acquisition

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

The idea behind Evertec and Nextnav Acquisition Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.