Correlation Between Small Cap and Navient SR
Can any of the company-specific risk be diversified away by investing in both Small Cap and Navient SR 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 Small Cap and Navient SR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and Navient SR, you can compare the effects of market volatilities on Small Cap and Navient SR 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 Small Cap with a short position of Navient SR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Navient SR.
Diversification Opportunities for Small Cap and Navient SR
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Small and Navient is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Navient SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient SR and Small Cap 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 Small Cap Premium are associated (or correlated) with Navient SR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient SR has no effect on the direction of Small Cap i.e., Small Cap and Navient SR go up and down completely randomly.
Pair Corralation between Small Cap and Navient SR
Considering the 90-day investment horizon Small Cap is expected to generate 1.22 times less return on investment than Navient SR. But when comparing it to its historical volatility, Small Cap Premium is 2.54 times less risky than Navient SR. It trades about 0.19 of its potential returns per unit of risk. Navient SR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,883 in Navient SR on November 9, 2024 and sell it today you would earn a total of 24.00 from holding Navient SR or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Premium vs. Navient SR
Performance |
| Timeline |
| Small Cap Premium |
| Navient SR |
Small Cap and Navient SR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Navient SR
The main advantage of trading using opposite Small Cap and Navient SR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Navient SR 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 Navient SR will offset losses from the drop in Navient SR's long position.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
| Navient SR vs. Fifth Third Bancorp | Navient SR vs. Popular Capital Trust | Navient SR vs. SLM Corp Pb | Navient SR vs. CHS Inc CM |
Check out your portfolio center.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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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