Correlation Between NextNav Warrant and Macmahon Holdings

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

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

Diversification Opportunities for NextNav Warrant and Macmahon Holdings

0.39

Correlation Coefficient

NextNav Warrant  Macmahon Holdings

Weak diversification

The 3 months correlation between NextNav and Macmahon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding NextNav Warrant and Macmahon Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macmahon Holdings and NextNav Warrant 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 Warrant are associated (or correlated) with Macmahon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macmahon Holdings has no effect on the direction of NextNav Warrant i.e., NextNav Warrant and Macmahon Holdings go up and down completely randomly.

Pair Corralation between NextNav Warrant and Macmahon Holdings

Assuming the 90 days horizon NextNav Warrant is expected to generate 1.19 times more return on investment than Macmahon Holdings. However, NextNav Warrant is 1.19 times more volatile than Macmahon Holdings Limited. It trades about 0.32 of its potential returns per unit of risk. Macmahon Holdings Limited is currently generating about 0.12 per unit of risk. If you would invest  257.00  in NextNav Warrant on September 16, 2024 and sell it today you would earn a total of  376.00  from holding NextNav Warrant or generate 146.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

NextNav Warrant  vs.  Macmahon Holdings Limited

NextNav Warrant

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NextNav Warrant are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NextNav Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Macmahon Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macmahon Holdings Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Macmahon Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextNav Warrant and Macmahon Holdings

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

The idea behind NextNav Warrant and Macmahon Holdings Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.