Correlation Between Nextdoor Holdings and IAC
Can any of the company-specific risk be diversified away by investing in both Nextdoor Holdings and IAC 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 Nextdoor Holdings and IAC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextdoor Holdings and IAC Inc, you can compare the effects of market volatilities on Nextdoor Holdings and IAC 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 Nextdoor Holdings with a short position of IAC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextdoor Holdings and IAC.
Diversification Opportunities for Nextdoor Holdings and IAC
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Nextdoor and IAC is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nextdoor Holdings and IAC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IAC Inc and Nextdoor Holdings 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 Nextdoor Holdings are associated (or correlated) with IAC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IAC Inc has no effect on the direction of Nextdoor Holdings i.e., Nextdoor Holdings and IAC go up and down completely randomly.
Pair Corralation between Nextdoor Holdings and IAC
Given the investment horizon of 90 days Nextdoor Holdings is expected to generate 4.0 times less return on investment than IAC. But when comparing it to its historical volatility, Nextdoor Holdings is 1.1 times less risky than IAC. It trades about 0.03 of its potential returns per unit of risk. IAC Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,183 in IAC Inc on February 4, 2024 and sell it today you would earn a total of 324.00 from holding IAC Inc or generate 6.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Nextdoor Holdings vs. IAC Inc
Performance |
Timeline |
Nextdoor Holdings |
IAC Inc |
Nextdoor Holdings and IAC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nextdoor Holdings and IAC
The main advantage of trading using opposite Nextdoor Holdings and IAC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextdoor Holdings position performs unexpectedly, IAC 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 IAC will offset losses from the drop in IAC's long position.Nextdoor Holdings vs. Twilio Inc | Nextdoor Holdings vs. Alphabet Inc Class A | Nextdoor Holdings vs. Match Group | Nextdoor Holdings vs. Spotify Technology SA |
Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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