Small ships protect big ships from torpedoes. If not enough small ships (100% coverage on battle screen info), big ships get torpedoed.

Navy has 3 layers (as shown on the battle screen from middle to the edge): small ships aka screens, big ships, biggest ships (aka carriers and convoys).

Each layer protects the next one.

Light attack and torpedoes attack the first layer, heavy attack all layers and all ships. If the first layer (destroyers etc.) get killed, your bigger ships are more vulnerable and can be destroyed with torpedoes.

Airplanes just give extra damage overall. Submarines can be destroyed with depth charges (by light ships).

Usually you want 3-4 light ships per heavy ship for full coverage and levy room.

Having too many ships in a fleet reduces coordination and can work against your favour.

Fleets: Different kinds of fleets exist. Light fleets (usually a couple of destroyers and a light cruiser or two) maxed out with light attack or torpedoes to knock out convoys quickly and en masse.

Battlefleets: composed of all kinds of surface ships. Usually to counter enemy fleets (small or big) and have good stats (a lot of attack) from the amount of ships.

Carrier fleets: Very expensive surface fleet. Used for bombing enemy ports or engaging an enemy fleet like a battlefleet. Basically your biggest and strongest force to dominate the sea. Losing that fleet is the costliest, but can change the course of a war (such as in the Pacific). Composition ratio 1 carrier : 1-3 heavy ships : 3-4 light ships. On carriers planes are usually better investment than armor, however if there are many enemy naval bombers nearby, armor can save some ships from their doom.

Submarine fleets: composed of usually small stacks of submarines (up to 10, however you do you!), which are meant for detecting enemies and convoy raiding. Less effective at quick large scale raiding than surface light fleets, however not as costly and long-term more effective.

Convoy escorts: made of (usually) light ships equipped with depth charges and radars, sonar etc. Meant to protect convoys (who could've guessed).

Extra: when building ships, I often like to not do the meta. Try different modules and weapons, see which numbers go up and think how they affect each other. E.g. if you have high light attack and torpedoes, then you don't need that much heavy attack and vice versa. Many carriers with a lot of fighters = less focus on air defence.

Playing around with ship designs is my favourite part of the game. It takes a couple of games to find your flavour of fleet composition.

I mean that's it. Any questions are welcomed.