Correlation Between NextNav Warrant and Kenvue
Can any of the company-specific risk be diversified away by investing in both NextNav Warrant and Kenvue 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 Kenvue into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NextNav Warrant and Kenvue Inc, you can compare the effects of market volatilities on NextNav Warrant and Kenvue 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 Kenvue. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextNav Warrant and Kenvue.
Diversification Opportunities for NextNav Warrant and Kenvue
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NextNav and Kenvue is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NextNav Warrant and Kenvue Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenvue Inc 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 Kenvue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenvue Inc has no effect on the direction of NextNav Warrant i.e., NextNav Warrant and Kenvue go up and down completely randomly.
Pair Corralation between NextNav Warrant and Kenvue
Assuming the 90 days horizon NextNav Warrant is expected to generate 3.64 times more return on investment than Kenvue. However, NextNav Warrant is 3.64 times more volatile than Kenvue Inc. It trades about 0.25 of its potential returns per unit of risk. Kenvue Inc is currently generating about 0.09 per unit of risk. If you would invest 489.00 in NextNav Warrant on September 5, 2024 and sell it today you would earn a total of 144.00 from holding NextNav Warrant or generate 29.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NextNav Warrant vs. Kenvue Inc
Performance |
| Timeline |
| NextNav Warrant |
| Kenvue Inc |
NextNav Warrant and Kenvue Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NextNav Warrant and Kenvue
The main advantage of trading using opposite NextNav Warrant and Kenvue positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextNav Warrant position performs unexpectedly, Kenvue 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 Kenvue will offset losses from the drop in Kenvue's long position.The idea behind NextNav Warrant and Kenvue Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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