Correlation Between Destinations Low and Destinations International

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

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

Diversification Opportunities for Destinations Low and Destinations International

0.75

Correlation Coefficient

Destinations Low  Destinations International

Poor diversification

The 3 months correlation between Destinations and Destinations is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Destinations Low Duration and Destinations International Equ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations International and Destinations Low 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 Low Duration are associated (or correlated) with Destinations International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations International has no effect on the direction of Destinations Low i.e., Destinations Low and Destinations International go up and down completely randomly.

Pair Corralation between Destinations Low and Destinations International

Assuming the 90 days horizon Destinations Low Duration is expected to generate 0.14 times more return on investment than Destinations International. However, Destinations Low Duration is 6.96 times less risky than Destinations International. It trades about -0.05 of its potential returns per unit of risk. Destinations International Equity is currently generating about -0.03 per unit of risk. If you would invest  935.00  in Destinations Low Duration on September 13, 2024 and sell it today you would lose (3.00) from holding Destinations Low Duration or give up 0.32% of portfolio value over 90 days.

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

Destinations Low Duration  vs.  Destinations International Equ

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 technical and fundamental indicators, Destinations Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Destinations International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Destinations Low and Destinations International

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

The idea behind Destinations Low Duration and Destinations International Equity 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.