Correlation Between Nextnav Acquisition and Microsoft

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

Diversification Opportunities for Nextnav Acquisition and Microsoft

0.3

Correlation Coefficient

Nextnav Acquisition  Microsoft

Weak diversification

The 3 months correlation between Nextnav and Microsoft is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and Microsoft go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and Microsoft

Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to generate 4.13 times more return on investment than Microsoft. However, Nextnav Acquisition is 4.13 times more volatile than Microsoft. It trades about 0.33 of its potential returns per unit of risk. Microsoft is currently generating about -0.17 per unit of risk. If you would invest  682.00  in Nextnav Acquisition Corp on January 29, 2024 and sell it today you would earn a total of  260.00  from holding Nextnav Acquisition Corp or generate 38.12% return on investment over 90 days.

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

Nextnav Acquisition Corp  vs.  Microsoft

Nextnav Acquisition Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Nextnav Acquisition displayed solid returns over the last few months and may actually be approaching a breakup point.

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nextnav Acquisition and Microsoft

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

The idea behind Nextnav Acquisition Corp and Microsoft 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.