Correlation Between Nextnav Acquisition and NextNav Warrant

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

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

Diversification Opportunities for Nextnav Acquisition and NextNav Warrant

0.99

Correlation Coefficient

Nextnav Acquisition  NextNav Warrant

No risk reduction

The 3 months correlation between Nextnav and NextNav is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and NextNav Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextNav Warrant and Nextnav Acquisition 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 Nextnav Acquisition Corp are associated (or correlated) with NextNav Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextNav Warrant has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and NextNav Warrant go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and NextNav Warrant

Allowing for the 90-day total investment horizon Nextnav Acquisition is expected to generate 1.22 times less return on investment than NextNav Warrant. But when comparing it to its historical volatility, Nextnav Acquisition Corp is 1.3 times less risky than NextNav Warrant. It trades about 0.4 of its potential returns per unit of risk. NextNav Warrant is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  235.00  in NextNav Warrant on September 3, 2024 and sell it today you would earn a total of  442.00  from holding NextNav Warrant or generate 188.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Nextnav Acquisition Corp  vs.  NextNav Warrant

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 uncertain basic indicators, Nextnav Acquisition displayed solid returns over the last few months and may actually be approaching a breakup point.

NextNav Warrant

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextnav Acquisition and NextNav Warrant

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

The idea behind Nextnav Acquisition Corp and NextNav Warrant 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.