Correlation Between Marchex and NextNav Warrant

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

By analyzing existing cross correlation between Marchex and NextNav Warrant, you can compare the effects of market volatilities on Marchex and NextNav Warrant 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 Marchex with a short position of NextNav Warrant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marchex and NextNav Warrant.

Diversification Opportunities for Marchex and NextNav Warrant

0.25

Correlation Coefficient

Marchex  NextNav Warrant

Modest diversification

The 3 months correlation between Marchex and NextNav is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Marchex and NextNav Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextNav Warrant and Marchex 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 Marchex are associated (or correlated) with NextNav Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextNav Warrant has no effect on the direction of Marchex i.e., Marchex and NextNav Warrant go up and down completely randomly.

Pair Corralation between Marchex and NextNav Warrant

Given the investment horizon of 90 days Marchex is expected to generate 1.01 times more return on investment than NextNav Warrant. However, Marchex is 1.01 times more volatile than NextNav Warrant. It trades about 0.15 of its potential returns per unit of risk. NextNav Warrant is currently generating about -0.11 per unit of risk. If you would invest  173.00  in Marchex on September 27, 2024 and sell it today you would earn a total of  25.00  from holding Marchex or generate 14.45% return on investment over 90 days.

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

Marchex  vs.  NextNav Warrant

Marchex

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marchex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical indicators, Marchex may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NextNav Warrant

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marchex and NextNav Warrant

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

The idea behind Marchex and NextNav Warrant 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.