Correlation Between Impact ISR and Renaissance Europe

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

By analyzing existing cross correlation between Impact ISR Performance and Renaissance Europe C, you can compare the effects of market volatilities on Impact ISR and Renaissance Europe 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 Impact ISR with a short position of Renaissance Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impact ISR and Renaissance Europe.

Diversification Opportunities for Impact ISR and Renaissance Europe

0.96

Correlation Coefficient

Impact ISR  Renaissance Europe

Almost no diversification

The 3 months correlation between Impact and Renaissance is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Impact ISR Performance and Renaissance Europe C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renaissance Europe and Impact ISR 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 Impact ISR Performance are associated (or correlated) with Renaissance Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renaissance Europe has no effect on the direction of Impact ISR i.e., Impact ISR and Renaissance Europe go up and down completely randomly.

Pair Corralation between Impact ISR and Renaissance Europe

Assuming the 90 days trading horizon Impact ISR Performance is expected to under-perform the Renaissance Europe. But the fund apears to be less risky and, when comparing its historical volatility, Impact ISR Performance is 1.33 times less risky than Renaissance Europe. The fund trades about -0.08 of its potential returns per unit of risk. The Renaissance Europe C is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  27,210  in Renaissance Europe C on September 23, 2024 and sell it today you would lose (818.00) from holding Renaissance Europe C or give up 3.01% of portfolio value over 90 days.

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

Impact ISR Performance  vs.  Renaissance Europe C

Impact ISR Performance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impact ISR Performance has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, Impact ISR is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Renaissance Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renaissance Europe C has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Renaissance Europe is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Impact ISR and Renaissance Europe

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

The idea behind Impact ISR Performance and Renaissance Europe C 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.