Correlation Between Domini Impact and Green Century

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

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

Diversification Opportunities for Domini Impact and Green Century

0.83

Correlation Coefficient

Domini Impact  Green Century

Very poor diversification

The 3 months correlation between Domini and Green is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Domini Impact Equity and Green Century Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Century Equity and Domini Impact 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 Domini Impact Equity are associated (or correlated) with Green Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Century Equity has no effect on the direction of Domini Impact i.e., Domini Impact and Green Century go up and down completely randomly.

Pair Corralation between Domini Impact and Green Century

Assuming the 90 days horizon Domini Impact is expected to generate 3.6 times less return on investment than Green Century. In addition to that, Domini Impact is 1.13 times more volatile than Green Century Equity. It trades about 0.01 of its total potential returns per unit of risk. Green Century Equity is currently generating about 0.04 per unit of volatility. If you would invest  8,808  in Green Century Equity on October 7, 2024 and sell it today you would earn a total of  388.00  from holding Green Century Equity or generate 4.41% return on investment over 90 days.

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

Domini Impact Equity  vs.  Green Century Equity

Domini Impact Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Green Century Equity

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Green Century Equity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Green Century is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Domini Impact and Green Century

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

The idea behind Domini Impact Equity and Green Century 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.