Correlation Between Nextnav Acquisition and CARPENTER

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

Diversification Opportunities for Nextnav Acquisition and CARPENTER

0.37

Correlation Coefficient

Nextnav Acquisition  CARPENTER

Weak diversification

The 3 months correlation between Nextnav and CARPENTER is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nextnav Acquisition Corp and CARPENTER TECHNOLOGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARPENTER TECHNOLOGY 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 CARPENTER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARPENTER TECHNOLOGY has no effect on the direction of Nextnav Acquisition i.e., Nextnav Acquisition and CARPENTER go up and down completely randomly.

Pair Corralation between Nextnav Acquisition and CARPENTER

Allowing for the 90-day total investment horizon Nextnav Acquisition Corp is expected to under-perform the CARPENTER. In addition to that, Nextnav Acquisition is 18.43 times more volatile than CARPENTER TECHNOLOGY P. It trades about -0.21 of its total potential returns per unit of risk. CARPENTER TECHNOLOGY P is currently generating about -0.09 per unit of volatility. If you would invest  10,040  in CARPENTER TECHNOLOGY P on November 29, 2024 and sell it today you would lose (39.00) from holding CARPENTER TECHNOLOGY P or give up 0.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Nextnav Acquisition Corp  vs.  CARPENTER TECHNOLOGY P

Nextnav Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nextnav Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CARPENTER TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARPENTER TECHNOLOGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CARPENTER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nextnav Acquisition and CARPENTER

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

The idea behind Nextnav Acquisition Corp and CARPENTER TECHNOLOGY P 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..