Correlation Between Rational Strategic and Navigator Tactical

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

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

Diversification Opportunities for Rational Strategic and Navigator Tactical

0.01

Correlation Coefficient

Rational Strategic  Navigator Tactical

Significant diversification

The 3 months correlation between Rational and NAVIGATOR is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Navigator Tactical Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navigator Tactical Fixed and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Navigator Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navigator Tactical Fixed has no effect on the direction of Rational Strategic i.e., Rational Strategic and Navigator Tactical go up and down completely randomly.

Pair Corralation between Rational Strategic and Navigator Tactical

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Navigator Tactical. In addition to that, Rational Strategic is 8.28 times more volatile than Navigator Tactical Fixed. It trades about -0.09 of its total potential returns per unit of risk. Navigator Tactical Fixed is currently generating about -0.01 per unit of volatility. If you would invest  984.00  in Navigator Tactical Fixed on December 30, 2024 and sell it today you would lose (1.00) from holding Navigator Tactical Fixed or give up 0.1% of portfolio value over 90 days.

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

Rational Strategic Allocation  vs.  Navigator Tactical Fixed

Rational Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Strategic Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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 fundamental indicators, Navigator 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 Rational Strategic and Navigator Tactical

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

The idea behind Rational Strategic Allocation and Navigator Tactical Fixed 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.