Correlation Between NXG NextGen and Destra Multi

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

By analyzing existing cross correlation between NXG NextGen Infrastructure and Destra Multi Alternative, you can compare the effects of market volatilities on NXG NextGen and Destra 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 NXG NextGen with a short position of Destra Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of NXG NextGen and Destra Multi.

Diversification Opportunities for NXG NextGen and Destra Multi

0.84

Correlation Coefficient

NXG NextGen  Destra Multi

Very poor diversification

The 3 months correlation between NXG and Destra is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NXG NextGen Infrastructure and Destra Multi Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destra Multi Alternative and NXG NextGen 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 NXG NextGen Infrastructure are associated (or correlated) with Destra Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destra Multi Alternative has no effect on the direction of NXG NextGen i.e., NXG NextGen and Destra Multi go up and down completely randomly.

Pair Corralation between NXG NextGen and Destra Multi

Considering the 90-day investment horizon NXG NextGen Infrastructure is expected to generate 2.8 times more return on investment than Destra Multi. However, NXG NextGen is 2.8 times more volatile than Destra Multi Alternative. It trades about 0.14 of its potential returns per unit of risk. Destra Multi Alternative is currently generating about 0.14 per unit of risk. If you would invest  3,976  in NXG NextGen Infrastructure on September 13, 2024 and sell it today you would earn a total of  629.00  from holding NXG NextGen Infrastructure or generate 15.82% return on investment over 90 days.

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

NXG NextGen Infrastructure  vs.  Destra Multi Alternative

NXG NextGen Infrastr

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NXG NextGen Infrastructure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, NXG NextGen reported solid returns over the last few months and may actually be approaching a breakup point.

Destra Multi Alternative

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Destra Multi Alternative are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong primary indicators, Destra Multi is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NXG NextGen and Destra Multi

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

The idea behind NXG NextGen Infrastructure and Destra Multi Alternative 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.