Correlation Between NextNav Warrant and Globalfoundries

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

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

Diversification Opportunities for NextNav Warrant and Globalfoundries

0.73

Correlation Coefficient

NextNav Warrant  Globalfoundries

Poor diversification

The 3 months correlation between NextNav and Globalfoundries is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding NextNav Warrant and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and NextNav Warrant 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 Warrant are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of NextNav Warrant i.e., NextNav Warrant and Globalfoundries go up and down completely randomly.

Pair Corralation between NextNav Warrant and Globalfoundries

Assuming the 90 days horizon NextNav Warrant is expected to generate 1.44 times more return on investment than Globalfoundries. However, NextNav Warrant is 1.44 times more volatile than Globalfoundries. It trades about 0.32 of its potential returns per unit of risk. Globalfoundries is currently generating about 0.07 per unit of risk. If you would invest  257.00  in NextNav Warrant on September 14, 2024 and sell it today you would earn a total of  376.00  from holding NextNav Warrant or generate 146.3% return on investment over 90 days.

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

NextNav Warrant  vs.  Globalfoundries

NextNav Warrant

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Globalfoundries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextNav Warrant and Globalfoundries

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

The idea behind NextNav Warrant and Globalfoundries 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.