Correlation Between Nextnav Acquisition and NETGEAR

Can any of the company-specific risk be diversified away by investing in both Nextnav Acquisition and NETGEAR 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 NETGEAR 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 NETGEAR, you can compare the effects of market volatilities on Nextnav Acquisition and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextnav Acquisition and NETGEAR.

Diversification Opportunities for Nextnav Acquisition and NETGEAR

0.81

Correlation Coefficient

Nextnav Acquisition  NETGEAR

Very poor diversification

The 3 months correlation between Nextnav and NETGEAR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and NETGEAR go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and NETGEAR

Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to generate 2.17 times more return on investment than NETGEAR. However, Nextnav Acquisition is 2.17 times more volatile than NETGEAR. It trades about 0.47 of its potential returns per unit of risk. NETGEAR is currently generating about 0.21 per unit of risk. If you would invest  1,195  in Nextnav Acquisition Corp on September 2, 2024 and sell it today you would earn a total of  544.00  from holding Nextnav Acquisition Corp or generate 45.52% return on investment over 90 days.

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

Nextnav Acquisition Corp  vs.  NETGEAR

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.

NETGEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextnav Acquisition and NETGEAR

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

The idea behind Nextnav Acquisition Corp and NETGEAR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.