Correlation Between Consumer Portfolio and Navient Corp

Can any of the company-specific risk be diversified away by investing in both Consumer Portfolio and Navient Corp 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 Consumer Portfolio and Navient Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consumer Portfolio Services and Navient Corp, you can compare the effects of market volatilities on Consumer Portfolio and Navient Corp 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 Consumer Portfolio with a short position of Navient Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Portfolio and Navient Corp.

Diversification Opportunities for Consumer Portfolio and Navient Corp

-0.37

Correlation Coefficient

Consumer Portfolio  Navient Corp

Very good diversification

The 3 months correlation between Consumer and Navient is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Portfolio Services and Navient Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient Corp and Consumer Portfolio 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 Consumer Portfolio Services are associated (or correlated) with Navient Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navient Corp has no effect on the direction of Consumer Portfolio i.e., Consumer Portfolio and Navient Corp go up and down completely randomly.

Pair Corralation between Consumer Portfolio and Navient Corp

Given the investment horizon of 90 days Consumer Portfolio Services is expected to generate 1.25 times more return on investment than Navient Corp. However, Consumer Portfolio is 1.25 times more volatile than Navient Corp. It trades about 0.04 of its potential returns per unit of risk. Navient Corp is currently generating about -0.02 per unit of risk. If you would invest  965.00  in Consumer Portfolio Services on September 30, 2024 and sell it today you would earn a total of  88.00  from holding Consumer Portfolio Services or generate 9.12% return on investment over 90 days.

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

Consumer Portfolio Services  vs.  Navient Corp

Consumer Portfolio

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Portfolio Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Consumer Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Navient Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Consumer Portfolio and Navient Corp

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

The idea behind Consumer Portfolio Services and Navient Corp 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.