Correlation Between ALM ES and Impact ISR

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

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

Diversification Opportunities for ALM ES and Impact ISR

-0.07

Correlation Coefficient

ALM ES  Impact ISR

Good diversification

The 3 months correlation between ALM and Impact is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding ALM ES Actions and Impact ISR Performance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impact ISR Performance and ALM ES 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 ALM ES Actions are associated (or correlated) with Impact ISR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impact ISR Performance has no effect on the direction of ALM ES i.e., ALM ES and Impact ISR go up and down completely randomly.

Pair Corralation between ALM ES and Impact ISR

Assuming the 90 days trading horizon ALM ES Actions is expected to under-perform the Impact ISR. In addition to that, ALM ES is 1.15 times more volatile than Impact ISR Performance. It trades about -0.13 of its total potential returns per unit of risk. Impact ISR Performance is currently generating about 0.14 per unit of volatility. If you would invest  5,331  in Impact ISR Performance on December 25, 2024 and sell it today you would earn a total of  324.00  from holding Impact ISR Performance or generate 6.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ALM ES Actions  vs.  Impact ISR Performance

ALM ES Actions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALM ES Actions has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest unsteady performance, the Fund's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the fund investors.

Impact ISR Performance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Impact ISR Performance are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Impact ISR may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ALM ES and Impact ISR

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

The idea behind ALM ES Actions and Impact ISR Performance 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.