Correlation Between Destinations Multi and Icon Financial

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

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

Diversification Opportunities for Destinations Multi and Icon Financial

0.86

Correlation Coefficient

Destinations Multi  Icon Financial

Very poor diversification

The 3 months correlation between Destinations and Icon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Destinations Multi Strategy and Icon Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Financial and Destinations Multi 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 Multi Strategy are associated (or correlated) with Icon Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Financial has no effect on the direction of Destinations Multi i.e., Destinations Multi and Icon Financial go up and down completely randomly.

Pair Corralation between Destinations Multi and Icon Financial

Assuming the 90 days horizon Destinations Multi Strategy is expected to generate 0.15 times more return on investment than Icon Financial. However, Destinations Multi Strategy is 6.65 times less risky than Icon Financial. It trades about -0.08 of its potential returns per unit of risk. Icon Financial Fund is currently generating about -0.09 per unit of risk. If you would invest  1,000.00  in Destinations Multi Strategy on December 24, 2024 and sell it today you would lose (7.00) from holding Destinations Multi Strategy or give up 0.7% of portfolio value over 90 days.

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

Destinations Multi Strategy  vs.  Icon Financial Fund

Destinations Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Destinations Multi Strategy has generated negative risk-adjusted returns adding no value to fund investors. 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.

Icon Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Icon Financial Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Icon Financial 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 Multi and Icon Financial

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

The idea behind Destinations Multi Strategy and Icon Financial Fund 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.