Correlation Between ODDITY Tech and Nextnav Acquisition

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

By analyzing existing cross correlation between ODDITY Tech Ltd and Nextnav Acquisition Corp, you can compare the effects of market volatilities on ODDITY Tech and Nextnav Acquisition 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 ODDITY Tech with a short position of Nextnav Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of ODDITY Tech and Nextnav Acquisition.

Diversification Opportunities for ODDITY Tech and Nextnav Acquisition

0.3

Correlation Coefficient

ODDITY Tech  Nextnav Acquisition

Weak diversification

The 3 months correlation between ODDITY and Nextnav is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ODDITY Tech Ltd and Nextnav Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextnav Acquisition Corp and ODDITY Tech 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 ODDITY Tech Ltd are associated (or correlated) with Nextnav Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextnav Acquisition Corp has no effect on the direction of ODDITY Tech i.e., ODDITY Tech and Nextnav Acquisition go up and down completely randomly.

Pair Corralation between ODDITY Tech and Nextnav Acquisition

Considering the 90-day investment horizon ODDITY Tech is expected to generate 9.81 times less return on investment than Nextnav Acquisition. But when comparing it to its historical volatility, ODDITY Tech Ltd is 1.31 times less risky than Nextnav Acquisition. It trades about 0.01 of its potential returns per unit of risk. Nextnav Acquisition Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  276.00  in Nextnav Acquisition Corp on November 19, 2024 and sell it today you would earn a total of  996.00  from holding Nextnav Acquisition Corp or generate 360.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.44%
Values	Daily Returns

ODDITY Tech Ltd  vs.  Nextnav Acquisition Corp

ODDITY Tech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ODDITY Tech Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, ODDITY Tech may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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.

Pair Trading with ODDITY Tech and Nextnav Acquisition

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

The idea behind ODDITY Tech Ltd and Nextnav Acquisition Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.