Correlation Between Outbrain and Nextdoor Holdings

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

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

Diversification Opportunities for Outbrain and Nextdoor Holdings

0.86

Correlation Coefficient

Outbrain  Nextdoor Holdings

Very poor diversification

The 3 months correlation between Outbrain and Nextdoor is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Outbrain and Nextdoor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextdoor Holdings and Outbrain 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 Outbrain are associated (or correlated) with Nextdoor Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextdoor Holdings has no effect on the direction of Outbrain i.e., Outbrain and Nextdoor Holdings go up and down completely randomly.

Pair Corralation between Outbrain and Nextdoor Holdings

Allowing for the 90-day total investment horizon Outbrain is expected to under-perform the Nextdoor Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Outbrain is 1.24 times less risky than Nextdoor Holdings. The stock trades about -0.26 of its potential returns per unit of risk. The Nextdoor Holdings is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  242.00  in Nextdoor Holdings on December 26, 2024 and sell it today you would lose (77.00) from holding Nextdoor Holdings or give up 31.82% of portfolio value over 90 days.

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

Outbrain  vs.  Nextdoor Holdings

Outbrain

Risk-Adjusted Performance

Very Weak

Over the last 90 days Outbrain has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nextdoor Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nextdoor Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Outbrain and Nextdoor Holdings

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

The idea behind Outbrain and Nextdoor Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.