Correlation Between Impact ISR and Echiquier Major

Can any of the company-specific risk be diversified away by investing in both Impact ISR and Echiquier Major 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 Echiquier Major 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 Echiquier Major SRI, you can compare the effects of market volatilities on Impact ISR and Echiquier Major 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 Echiquier Major. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impact ISR and Echiquier Major.

Diversification Opportunities for Impact ISR and Echiquier Major

0.55

Correlation Coefficient

Impact ISR  Echiquier Major

Very weak diversification

The 3 months correlation between Impact and Echiquier is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Impact ISR Performance and Echiquier Major SRI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echiquier Major SRI 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 Echiquier Major. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echiquier Major SRI has no effect on the direction of Impact ISR i.e., Impact ISR and Echiquier Major go up and down completely randomly.

Pair Corralation between Impact ISR and Echiquier Major

Assuming the 90 days trading horizon Impact ISR Performance is expected to under-perform the Echiquier Major. But the fund apears to be less risky and, when comparing its historical volatility, Impact ISR Performance is 1.13 times less risky than Echiquier Major. The fund trades about -0.04 of its potential returns per unit of risk. The Echiquier Major SRI is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  40,997  in Echiquier Major SRI on October 10, 2024 and sell it today you would lose (334.00) from holding Echiquier Major SRI or give up 0.81% of portfolio value over 90 days.

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

Impact ISR Performance  vs.  Echiquier Major SRI

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Echiquier Major SRI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Echiquier Major SRI has generated negative risk-adjusted returns adding no value to fund investors. In spite of very healthy basic indicators, Echiquier Major is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Impact ISR and Echiquier Major

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

The idea behind Impact ISR Performance and Echiquier Major SRI 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.