Correlation Between Midcap Growth and Destra International

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

By analyzing existing cross correlation between Midcap Growth Fund and Destra International Event Driven, you can compare the effects of market volatilities on Midcap Growth and Destra International 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 Midcap Growth with a short position of Destra International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and Destra International.

Diversification Opportunities for Midcap Growth and Destra International

-0.78

Correlation Coefficient

Midcap Growth  Destra International

Pay attention - limited upside

The 3 months correlation between Midcap and Destra is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and Destra International Event Dri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destra International and Midcap Growth 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 Midcap Growth Fund are associated (or correlated) with Destra International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destra International has no effect on the direction of Midcap Growth i.e., Midcap Growth and Destra International go up and down completely randomly.

Pair Corralation between Midcap Growth and Destra International

Assuming the 90 days horizon Midcap Growth Fund is expected to generate 1.24 times more return on investment than Destra International. However, Midcap Growth is 1.24 times more volatile than Destra International Event Driven. It trades about 0.34 of its potential returns per unit of risk. Destra International Event Driven is currently generating about -0.13 per unit of risk. If you would invest  1,070  in Midcap Growth Fund on October 14, 2024 and sell it today you would earn a total of  132.00  from holding Midcap Growth Fund or generate 12.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	51.61%
Values	Daily Returns

Midcap Growth Fund  vs.  Destra International Event Dri

Midcap Growth

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Midcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Destra International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Destra International Event Driven has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Midcap Growth and Destra International

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

The idea behind Midcap Growth Fund and Destra International Event Driven 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .