Correlation Between NextNav Warrant and ROK Resources

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

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

Diversification Opportunities for NextNav Warrant and ROK Resources

-0.14

Correlation Coefficient

NextNav Warrant  ROK Resources

Good diversification

The 3 months correlation between NextNav and ROK is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding NextNav Warrant and ROK Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROK Resources 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 ROK Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROK Resources has no effect on the direction of NextNav Warrant i.e., NextNav Warrant and ROK Resources go up and down completely randomly.

Pair Corralation between NextNav Warrant and ROK Resources

Assuming the 90 days horizon NextNav Warrant is expected to under-perform the ROK Resources. In addition to that, NextNav Warrant is 1.78 times more volatile than ROK Resources. It trades about -0.02 of its total potential returns per unit of risk. ROK Resources is currently generating about -0.01 per unit of volatility. If you would invest  12.00  in ROK Resources on December 28, 2024 and sell it today you would lose (1.00) from holding ROK Resources or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

NextNav Warrant  vs.  ROK Resources

NextNav Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days NextNav Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

ROK Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days ROK Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ROK Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NextNav Warrant and ROK Resources

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

The idea behind NextNav Warrant and ROK Resources 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.