Correlation Between Nextnav Acquisition and Palo Alto

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

Diversification Opportunities for Nextnav Acquisition and Palo Alto

0.82

Correlation Coefficient

Nextnav Acquisition  Palo Alto

Very poor diversification

The 3 months correlation between Nextnav and Palo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks 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 Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and Palo Alto go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and Palo Alto

Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to generate 2.06 times more return on investment than Palo Alto. However, Nextnav Acquisition is 2.06 times more volatile than Palo Alto Networks. It trades about 0.51 of its potential returns per unit of risk. Palo Alto Networks is currently generating about 0.19 per unit of risk. If you would invest  1,162  in Nextnav Acquisition Corp on September 1, 2024 and sell it today you would earn a total of  577.00  from holding Nextnav Acquisition Corp or generate 49.66% return on investment over 90 days.

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

Nextnav Acquisition Corp  vs.  Palo Alto Networks

Nextnav Acquisition Corp

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nextnav Acquisition Corp are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Nextnav Acquisition displayed solid returns over the last few months and may actually be approaching a breakup point.

Palo Alto Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Palo Alto may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Nextnav Acquisition and Palo Alto

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

The idea behind Nextnav Acquisition Corp and Palo Alto Networks 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.