Correlation Between Shutterstock and Nextdoor Holdings

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

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

Diversification Opportunities for Shutterstock and Nextdoor Holdings

0.3

Correlation Coefficient

Shutterstock  Nextdoor Holdings

Weak diversification

The 3 months correlation between Shutterstock and Nextdoor is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Shutterstock and Nextdoor Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextdoor Holdings and Shutterstock 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 Shutterstock 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 Shutterstock i.e., Shutterstock and Nextdoor Holdings go up and down completely randomly.

Pair Corralation between Shutterstock and Nextdoor Holdings

Given the investment horizon of 90 days Shutterstock is expected to generate 0.87 times more return on investment than Nextdoor Holdings. However, Shutterstock is 1.15 times less risky than Nextdoor Holdings. It trades about 0.06 of its potential returns per unit of risk. Nextdoor Holdings is currently generating about -0.1 per unit of risk. If you would invest  2,927  in Shutterstock on September 20, 2024 and sell it today you would earn a total of  79.00  from holding Shutterstock or generate 2.7% return on investment over 90 days.

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

Shutterstock  vs.  Nextdoor Holdings

Shutterstock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shutterstock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Nextdoor Holdings

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, Nextdoor Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Shutterstock and Nextdoor Holdings

The main advantage of trading using opposite Shutterstock and Nextdoor Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shutterstock 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 Shutterstock 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.

Check out your portfolio center.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.