Correlation Between Navigator Equity and Angel Oak

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

By analyzing existing cross correlation between Navigator Equity Hedged and Angel Oak Multi Strategy, you can compare the effects of market volatilities on Navigator Equity and Angel Oak 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 Navigator Equity with a short position of Angel Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Navigator Equity and Angel Oak.

Diversification Opportunities for Navigator Equity and Angel Oak

-0.56

Correlation Coefficient

Navigator Equity  Angel Oak

Excellent diversification

The 3 months correlation between Navigator and Angel is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Navigator Equity Hedged and Angel Oak Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Angel Oak Multi and Navigator Equity 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 Navigator Equity Hedged are associated (or correlated) with Angel Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Angel Oak Multi has no effect on the direction of Navigator Equity i.e., Navigator Equity and Angel Oak go up and down completely randomly.

Pair Corralation between Navigator Equity and Angel Oak

Assuming the 90 days horizon Navigator Equity Hedged is expected to generate 25.66 times more return on investment than Angel Oak. However, Navigator Equity is 25.66 times more volatile than Angel Oak Multi Strategy. It trades about 0.33 of its potential returns per unit of risk. Angel Oak Multi Strategy is currently generating about -0.11 per unit of risk. If you would invest  150,000  in Navigator Equity Hedged on September 14, 2024 and sell it today you would earn a total of  15,010  from holding Navigator Equity Hedged or generate 10.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	14.29%
Values	Daily Returns

Navigator Equity Hedged  vs.  Angel Oak Multi Strategy

Navigator Equity Hedged

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Navigator Equity Hedged has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Navigator Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Angel Oak Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Angel Oak Multi Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Angel Oak is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Navigator Equity and Angel Oak

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

The idea behind Navigator Equity Hedged and Angel Oak Multi Strategy 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.