Correlation Between Nextnav Acquisition and Sunoco

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Can any of the company-specific risk be diversified away by investing in both Nextnav Acquisition and Sunoco 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 Sunoco 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 Sunoco LP 6, you can compare the effects of market volatilities on Nextnav Acquisition and Sunoco 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 Sunoco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextnav Acquisition and Sunoco.

Diversification Opportunities for Nextnav Acquisition and Sunoco

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Nextnav and Sunoco is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and Sunoco LP 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunoco LP 6 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 Sunoco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunoco LP 6 has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and Sunoco go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and Sunoco

Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to generate 10.4 times more return on investment than Sunoco. However, Nextnav Acquisition is 10.4 times more volatile than Sunoco LP 6. It trades about 0.34 of its potential returns per unit of risk. Sunoco LP 6 is currently generating about 0.04 per unit of risk. If you would invest  757.00  in Nextnav Acquisition Corp on September 5, 2024 and sell it today you would earn a total of  877.00  from holding Nextnav Acquisition Corp or generate 115.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.31%
ValuesDaily Returns

Nextnav Acquisition Corp  vs.  Sunoco LP 6

 Performance 
       Timeline  
Nextnav Acquisition Corp 

Risk-Adjusted Performance

26 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 26 (%) 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.
Sunoco LP 6 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Sunoco LP 6 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sunoco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nextnav Acquisition and Sunoco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nextnav Acquisition and Sunoco

The main advantage of trading using opposite Nextnav Acquisition and Sunoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextnav Acquisition position performs unexpectedly, Sunoco 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 Sunoco will offset losses from the drop in Sunoco's long position.
The idea behind Nextnav Acquisition Corp and Sunoco LP 6 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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