Correlation Between Scorpio Tankers and Navigator Holdings

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

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

Diversification Opportunities for Scorpio Tankers and Navigator Holdings

0.45

Correlation Coefficient

Scorpio Tankers  Navigator Holdings

Very weak diversification

The 3 months correlation between Scorpio and Navigator is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Scorpio Tankers and Navigator Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navigator Holdings and Scorpio Tankers 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 Scorpio Tankers are associated (or correlated) with Navigator Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navigator Holdings has no effect on the direction of Scorpio Tankers i.e., Scorpio Tankers and Navigator Holdings go up and down completely randomly.

Pair Corralation between Scorpio Tankers and Navigator Holdings

Given the investment horizon of 90 days Scorpio Tankers is expected to under-perform the Navigator Holdings. In addition to that, Scorpio Tankers is 1.11 times more volatile than Navigator Holdings. It trades about -0.25 of its total potential returns per unit of risk. Navigator Holdings is currently generating about -0.01 per unit of volatility. If you would invest  1,594  in Navigator Holdings on September 2, 2024 and sell it today you would lose (28.00) from holding Navigator Holdings or give up 1.76% of portfolio value over 90 days.

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

Scorpio Tankers  vs.  Navigator Holdings

Scorpio Tankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scorpio Tankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Navigator Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navigator Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Navigator Holdings is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scorpio Tankers and Navigator Holdings

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

The idea behind Scorpio Tankers and Navigator Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.