Correlation Between Navigator Tactical and Sierra Tactical

Can any of the company-specific risk be diversified away by investing in both Navigator Tactical and Sierra Tactical 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 Tactical 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 Tactical Bond, you can compare the effects of market volatilities on Navigator Tactical and Sierra Tactical 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 Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Navigator Tactical and Sierra Tactical.

Diversification Opportunities for Navigator Tactical and Sierra Tactical

0.96

Correlation Coefficient

Navigator Tactical  Sierra Tactical

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 Tactical Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Tactical Bond 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 Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Tactical Bond has no effect on the direction of Navigator Tactical i.e., Navigator Tactical and Sierra Tactical go up and down completely randomly.

Pair Corralation between Navigator Tactical and Sierra Tactical

Assuming the 90 days horizon Navigator Tactical Fixed is expected to under-perform the Sierra Tactical. In addition to that, Navigator Tactical is 1.32 times more volatile than Sierra Tactical Bond. It trades about -0.28 of its total potential returns per unit of risk. Sierra Tactical Bond is currently generating about -0.2 per unit of volatility. If you would invest  2,666  in Sierra Tactical Bond on December 30, 2024 and sell it today you would lose (26.00) from holding Sierra Tactical Bond or give up 0.98% of portfolio value 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 Tactical Bond

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 Tactical Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Tactical Bond are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Sierra Tactical 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 Tactical

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

The idea behind Navigator Tactical Fixed and Sierra Tactical Bond 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..