Correlation Between Nextnav Acquisition and Monolithic Power

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

Diversification Opportunities for Nextnav Acquisition and Monolithic Power

-0.88

Correlation Coefficient

Nextnav Acquisition  Monolithic Power

Pay attention - limited upside

The 3 months correlation between Nextnav and Monolithic is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and Monolithic Power Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monolithic Power Systems 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 Monolithic Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monolithic Power Systems has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and Monolithic Power go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and Monolithic Power

Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to generate 0.97 times more return on investment than Monolithic Power. However, Nextnav Acquisition Corp is 1.03 times less risky than Monolithic Power. It trades about 0.39 of its potential returns per unit of risk. Monolithic Power Systems is currently generating about -0.15 per unit of risk. If you would invest  709.00  in Nextnav Acquisition Corp on August 31, 2024 and sell it today you would earn a total of  964.00  from holding Nextnav Acquisition Corp or generate 135.97% return on investment over 90 days.

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

Nextnav Acquisition Corp  vs.  Monolithic Power Systems

Nextnav Acquisition Corp

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 30 (%) 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.

Monolithic Power Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monolithic Power Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Nextnav Acquisition and Monolithic Power

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

The idea behind Nextnav Acquisition Corp and Monolithic Power Systems 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.