Correlation Between Nextdoor Holdings and Snap

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

By analyzing existing cross correlation between Nextdoor Holdings and Snap Inc, you can compare the effects of market volatilities on Nextdoor Holdings and Snap 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 Snap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextdoor Holdings and Snap.

Diversification Opportunities for Nextdoor Holdings and Snap

0.49

Correlation Coefficient

Nextdoor Holdings  Snap

Very weak diversification

The 3 months correlation between Nextdoor and Snap is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Nextdoor Holdings and Snap Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap 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 Snap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap Inc has no effect on the direction of Nextdoor Holdings i.e., Nextdoor Holdings and Snap go up and down completely randomly.

Pair Corralation between Nextdoor Holdings and Snap

Given the investment horizon of 90 days Nextdoor Holdings is expected to under-perform the Snap. In addition to that, Nextdoor Holdings is 1.12 times more volatile than Snap Inc. It trades about -0.1 of its total potential returns per unit of risk. Snap Inc is currently generating about 0.12 per unit of volatility. If you would invest  1,051  in Snap Inc on September 20, 2024 and sell it today you would earn a total of  67.00  from holding Snap Inc or generate 6.37% return on investment over 90 days.

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

Nextdoor Holdings  vs.  Snap Inc

Nextdoor Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextdoor Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nextdoor Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Snap Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Snap Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Snap reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nextdoor Holdings and Snap

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

The idea behind Nextdoor Holdings and Snap Inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.