Correlation Between Navigator Tactical and Sierra Strategic

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

By analyzing existing cross correlation between Navigator Tactical Fixed and Sierra Strategic Income, you can compare the effects of market volatilities on Navigator Tactical and Sierra Strategic 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 Tactical with a short position of Sierra Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Navigator Tactical and Sierra Strategic.

Diversification Opportunities for Navigator Tactical and Sierra Strategic

0.96

Correlation Coefficient

Navigator Tactical  Sierra Strategic

Almost no diversification

The 3 months correlation between Navigator and Sierra is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Navigator Tactical Fixed and Sierra Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Strategic Income and Navigator Tactical 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 Tactical Fixed are associated (or correlated) with Sierra Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Strategic Income has no effect on the direction of Navigator Tactical i.e., Navigator Tactical and Sierra Strategic go up and down completely randomly.

Pair Corralation between Navigator Tactical and Sierra Strategic

Assuming the 90 days horizon Navigator Tactical Fixed is expected to under-perform the Sierra Strategic. In addition to that, Navigator Tactical is 1.66 times more volatile than Sierra Strategic Income. It trades about -0.01 of its total potential returns per unit of risk. Sierra Strategic Income is currently generating about 0.01 per unit of volatility. If you would invest  1,973  in Sierra Strategic Income on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Sierra Strategic Income or generate 0.05% return on investment over 90 days.

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

Navigator Tactical Fixed  vs.  Sierra Strategic Income

Navigator Tactical Fixed

Risk-Adjusted Performance

Very Weak

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

Sierra Strategic Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sierra Strategic Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sierra Strategic 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 Tactical and Sierra Strategic

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

The idea behind Navigator Tactical Fixed and Sierra Strategic Income 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.