Correlation Between Destinations International and Destinations Multi
Can any of the company-specific risk be diversified away by investing in both Destinations International and Destinations 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 Destinations International and Destinations Multi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Destinations International Equity and Destinations Multi Strategy, you can compare the effects of market volatilities on Destinations International and Destinations 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 Destinations International with a short position of Destinations Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Destinations International and Destinations Multi.
Diversification Opportunities for Destinations International and Destinations Multi
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Destinations and Destinations is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Destinations International Equ and Destinations Multi Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Multi and Destinations International 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 International Equity are associated (or correlated) with Destinations Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Multi has no effect on the direction of Destinations International i.e., Destinations International and Destinations Multi go up and down completely randomly.
Pair Corralation between Destinations International and Destinations Multi
Assuming the 90 days horizon Destinations International Equity is expected to under-perform the Destinations Multi. In addition to that, Destinations International is 4.65 times more volatile than Destinations Multi Strategy. It trades about -0.06 of its total potential returns per unit of risk. Destinations Multi Strategy is currently generating about 0.12 per unit of volatility. If you would invest 1,051 in Destinations Multi Strategy on September 14, 2024 and sell it today you would earn a total of 12.00 from holding Destinations Multi Strategy or generate 1.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Destinations International Equ vs. Destinations Multi Strategy
Performance |
Timeline |
Destinations International |
Destinations Multi |
Destinations International and Destinations Multi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Destinations International and Destinations Multi
The main advantage of trading using opposite Destinations International and Destinations Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destinations International position performs unexpectedly, Destinations 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 Destinations Multi will offset losses from the drop in Destinations Multi's long position.The idea behind Destinations International Equity and Destinations Multi Strategy 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.
Check out your portfolio center.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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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