Correlation Between FinVolution and Destinations Municipal

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

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

Diversification Opportunities for FinVolution and Destinations Municipal

0.14

Correlation Coefficient

FinVolution  Destinations Municipal

Average diversification

The 3 months correlation between FinVolution and Destinations is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding FinVolution Group and Destinations Municipal Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Municipal and FinVolution 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 FinVolution Group are associated (or correlated) with Destinations Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Municipal has no effect on the direction of FinVolution i.e., FinVolution and Destinations Municipal go up and down completely randomly.

Pair Corralation between FinVolution and Destinations Municipal

Given the investment horizon of 90 days FinVolution Group is expected to generate 11.55 times more return on investment than Destinations Municipal. However, FinVolution is 11.55 times more volatile than Destinations Municipal Fixed. It trades about 0.02 of its potential returns per unit of risk. Destinations Municipal Fixed is currently generating about -0.1 per unit of risk. If you would invest  675.00  in FinVolution Group on October 5, 2024 and sell it today you would earn a total of  4.00  from holding FinVolution Group or generate 0.59% return on investment over 90 days.

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

FinVolution Group  vs.  Destinations Municipal Fixed

FinVolution Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FinVolution Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, FinVolution is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Destinations Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FinVolution and Destinations Municipal

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

The idea behind FinVolution Group and Destinations Municipal Fixed 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.