Correlation Between Regional Bank and Destinations Low

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

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

Diversification Opportunities for Regional Bank and Destinations Low

-0.74

Correlation Coefficient

Regional Bank  Destinations Low

Pay attention - limited upside

The 3 months correlation between Regional and Destinations is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Destinations Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Low Duration and Regional Bank 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 Regional Bank Fund are associated (or correlated) with Destinations Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Low Duration has no effect on the direction of Regional Bank i.e., Regional Bank and Destinations Low go up and down completely randomly.

Pair Corralation between Regional Bank and Destinations Low

Assuming the 90 days horizon Regional Bank Fund is expected to generate 19.27 times more return on investment than Destinations Low. However, Regional Bank is 19.27 times more volatile than Destinations Low Duration. It trades about 0.01 of its potential returns per unit of risk. Destinations Low Duration is currently generating about -0.04 per unit of risk. If you would invest  2,883  in Regional Bank Fund on September 23, 2024 and sell it today you would lose (23.00) from holding Regional Bank Fund or give up 0.8% of portfolio value over 90 days.

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

Regional Bank Fund  vs.  Destinations Low Duration

Regional Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Destinations Low Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Regional Bank and Destinations Low

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

The idea behind Regional Bank Fund and Destinations Low Duration 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.