Correlation Between Nextdoor Holdings and WEBTOON Entertainment

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

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

Diversification Opportunities for Nextdoor Holdings and WEBTOON Entertainment

0.77

Correlation Coefficient

Nextdoor Holdings  WEBTOON Entertainment

Poor diversification

The 3 months correlation between Nextdoor and WEBTOON is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nextdoor Holdings and WEBTOON Entertainment Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEBTOON Entertainment and Nextdoor Holdings 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 Nextdoor Holdings are associated (or correlated) with WEBTOON Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEBTOON Entertainment has no effect on the direction of Nextdoor Holdings i.e., Nextdoor Holdings and WEBTOON Entertainment go up and down completely randomly.

Pair Corralation between Nextdoor Holdings and WEBTOON Entertainment

Given the investment horizon of 90 days Nextdoor Holdings is expected to generate 1.2 times more return on investment than WEBTOON Entertainment. However, Nextdoor Holdings is 1.2 times more volatile than WEBTOON Entertainment Common. It trades about -0.17 of its potential returns per unit of risk. WEBTOON Entertainment Common is currently generating about -0.26 per unit of risk. If you would invest  246.00  in Nextdoor Holdings on January 5, 2025 and sell it today you would lose (107.00) from holding Nextdoor Holdings or give up 43.5% of portfolio value over 90 days.

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

Nextdoor Holdings  vs.  WEBTOON Entertainment Common

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 May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

WEBTOON Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days WEBTOON Entertainment Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Nextdoor Holdings and WEBTOON Entertainment

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

The idea behind Nextdoor Holdings and WEBTOON Entertainment Common 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.