Can any of the company-specific risk be diversified away by investing in both Nextnav Acquisition and Affirm Holdings 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 Affirm Holdings 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 Affirm Holdings, you can compare the effects of market volatilities on Nextnav Acquisition and Affirm Holdings 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 Affirm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextnav Acquisition and Affirm Holdings.
Diversification Opportunities for Nextnav Acquisition and Affirm Holdings
The 3 months correlation between Nextnav and Affirm is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and Affirm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affirm Holdings 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 Affirm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affirm Holdings has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and Affirm Holdings go up and down completely randomly.
Pair Corralation between Nextnav Acquisition and Affirm Holdings
Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to generate 0.74 times more return on investment than Affirm Holdings. However, Nextnav Acquisition Corp is 1.34 times less risky than Affirm Holdings. It trades about -0.1 of its potential returns per unit of risk. Affirm Holdings is currently generating about -0.2 per unit of risk. If you would invest 854.00 in Nextnav Acquisition Corp on March 6, 2024 and sell it today you would lose (69.00) from holding Nextnav Acquisition Corp or give up 8.08% of portfolio value over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 15 (%) 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.
Over the last 90 days Affirm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.