Correlation Between Destinations Large and Destinations Multi

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

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

Diversification Opportunities for Destinations Large and Destinations Multi

0.53

Correlation Coefficient

Destinations Large  Destinations Multi

Very weak diversification

The 3 months correlation between Destinations and Destinations is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Destinations Large Cap and Destinations Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Multi and Destinations Large 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 Large Cap are associated (or correlated) with Destinations Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Multi has no effect on the direction of Destinations Large i.e., Destinations Large and Destinations Multi go up and down completely randomly.

Pair Corralation between Destinations Large and Destinations Multi

Assuming the 90 days horizon Destinations Large Cap is expected to under-perform the Destinations Multi. In addition to that, Destinations Large is 20.61 times more volatile than Destinations Multi Strategy. It trades about -0.21 of its total potential returns per unit of risk. Destinations Multi Strategy is currently generating about -0.08 per unit of volatility. If you would invest  1,033  in Destinations Multi Strategy on September 23, 2024 and sell it today you would lose (4.00) from holding Destinations Multi Strategy or give up 0.39% of portfolio value over 90 days.

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

Destinations Large Cap  vs.  Destinations Multi Strategy

Destinations Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destinations Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Destinations Multi

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Destinations Multi Strategy are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Destinations Multi 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 Large and Destinations Multi

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

The idea behind Destinations Large Cap and Destinations Multi Strategy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.