Correlation Between Destinations International and Destinations Small

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

By analyzing existing cross correlation between Destinations International Equity and Destinations Small Mid Cap, you can compare the effects of market volatilities on Destinations International and Destinations Small 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 Destinations International with a short position of Destinations Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destinations International and Destinations Small.

Diversification Opportunities for Destinations International and Destinations Small

-0.18

Correlation Coefficient

Destinations International  Destinations Small

Good diversification

The 3 months correlation between Destinations and Destinations is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Destinations International Equ and Destinations Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Small Mid and Destinations International 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 Destinations International Equity are associated (or correlated) with Destinations Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Small Mid has no effect on the direction of Destinations International i.e., Destinations International and Destinations Small go up and down completely randomly.

Pair Corralation between Destinations International and Destinations Small

Assuming the 90 days horizon Destinations International Equity is expected to under-perform the Destinations Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Destinations International Equity is 2.06 times less risky than Destinations Small. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Destinations Small Mid Cap is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,051  in Destinations Small Mid Cap on September 23, 2024 and sell it today you would lose (79.00) from holding Destinations Small Mid Cap or give up 7.52% of portfolio value over 90 days.

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

Destinations International Equ  vs.  Destinations Small Mid Cap

Destinations International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Destinations Small Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Destinations Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Destinations International and Destinations Small

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

The idea behind Destinations International Equity and Destinations Small Mid Cap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.