Correlation Between Essilor International and Nextnav Acquisition

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

By analyzing existing cross correlation between Essilor International SA and Nextnav Acquisition Corp, you can compare the effects of market volatilities on Essilor International and Nextnav Acquisition 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 Essilor International with a short position of Nextnav Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essilor International and Nextnav Acquisition.

Diversification Opportunities for Essilor International and Nextnav Acquisition

0.62

Correlation Coefficient

Essilor International  Nextnav Acquisition

Poor diversification

The 3 months correlation between Essilor and Nextnav is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Essilor International SA and Nextnav Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextnav Acquisition Corp and Essilor International 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 Essilor International SA are associated (or correlated) with Nextnav Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextnav Acquisition Corp has no effect on the direction of Essilor International i.e., Essilor International and Nextnav Acquisition go up and down completely randomly.

Pair Corralation between Essilor International and Nextnav Acquisition

Assuming the 90 days horizon Essilor International SA is expected to generate 0.15 times more return on investment than Nextnav Acquisition. However, Essilor International SA is 6.55 times less risky than Nextnav Acquisition. It trades about 0.27 of its potential returns per unit of risk. Nextnav Acquisition Corp is currently generating about -0.09 per unit of risk. If you would invest  12,059  in Essilor International SA on October 22, 2024 and sell it today you would earn a total of  551.00  from holding Essilor International SA or generate 4.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

Essilor International SA  vs.  Nextnav Acquisition Corp

Essilor International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essilor International SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Essilor International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Nextnav Acquisition Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 8 (%) 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.

Pair Trading with Essilor International and Nextnav Acquisition

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

The idea behind Essilor International SA and Nextnav Acquisition Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.