Correlation Between SLM Corp and Navient SR

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

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

Diversification Opportunities for SLM Corp and Navient SR

0.29

Correlation Coefficient

SLM Corp  Navient SR

Modest diversification

The 3 months correlation between SLM and Navient is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SLM Corp Pb and Navient SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navient SR and SLM Corp 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 SLM Corp Pb 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 SLM Corp i.e., SLM Corp and Navient SR go up and down completely randomly.

Pair Corralation between SLM Corp and Navient SR

Assuming the 90 days horizon SLM Corp Pb is expected to generate 0.49 times more return on investment than Navient SR. However, SLM Corp Pb is 2.04 times less risky than Navient SR. It trades about -0.02 of its potential returns per unit of risk. Navient SR is currently generating about -0.05 per unit of risk. If you would invest  7,446  in SLM Corp Pb on September 13, 2024 and sell it today you would lose (38.00) from holding SLM Corp Pb or give up 0.51% of portfolio value over 90 days.

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

SLM Corp Pb  vs.  Navient SR

SLM Corp Pb

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SLM Corp Pb has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Navient SR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navient SR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Navient SR is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SLM Corp and Navient SR

The main advantage of trading using opposite SLM Corp and Navient SR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLM Corp 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.

The idea behind SLM Corp Pb and Navient SR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.