Correlation Between Destinations Multi and Destinations Low

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

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

Diversification Opportunities for Destinations Multi and Destinations Low

-0.64

Correlation Coefficient

Destinations Multi  Destinations Low

Excellent diversification

The 3 months correlation between Destinations and Destinations is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Destinations Multi Strategy 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 Destinations Multi 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 Multi Strategy 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 Destinations Multi i.e., Destinations Multi and Destinations Low go up and down completely randomly.

Pair Corralation between Destinations Multi and Destinations Low

Assuming the 90 days horizon Destinations Multi Strategy is expected to generate 1.34 times more return on investment than Destinations Low. However, Destinations Multi is 1.34 times more volatile than Destinations Low Duration. It trades about 0.16 of its potential returns per unit of risk. Destinations Low Duration is currently generating about -0.06 per unit of risk. If you would invest  1,021  in Destinations Multi Strategy on September 13, 2024 and sell it today you would earn a total of  16.00  from holding Destinations Multi Strategy or generate 1.57% return on investment over 90 days.

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

Destinations Multi Strategy  vs.  Destinations Low Duration

Destinations Multi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Destinations Multi Strategy are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Destinations Multi 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 Destinations Multi and Destinations Low

The main advantage of trading using opposite Destinations Multi and Destinations Low positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Destinations Multi 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 Destinations Multi Strategy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.