Correlation Between Domini Impact and Portfolio

Can any of the company-specific risk be diversified away by investing in both Domini Impact and Portfolio 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 Portfolio 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 Portfolio 21 Global, you can compare the effects of market volatilities on Domini Impact and Portfolio 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 Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Domini Impact and Portfolio.

Diversification Opportunities for Domini Impact and Portfolio

0.37

Correlation Coefficient

Domini Impact  Portfolio

Weak diversification

The 3 months correlation between Domini and Portfolio is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Domini Impact Equity and Portfolio 21 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portfolio 21 Global 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 Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portfolio 21 Global has no effect on the direction of Domini Impact i.e., Domini Impact and Portfolio go up and down completely randomly.

Pair Corralation between Domini Impact and Portfolio

Assuming the 90 days horizon Domini Impact Equity is expected to generate 1.32 times more return on investment than Portfolio. However, Domini Impact is 1.32 times more volatile than Portfolio 21 Global. It trades about 0.19 of its potential returns per unit of risk. Portfolio 21 Global is currently generating about 0.05 per unit of risk. If you would invest  3,765  in Domini Impact Equity on September 12, 2024 and sell it today you would earn a total of  322.00  from holding Domini Impact Equity or generate 8.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Domini Impact Equity  vs.  Portfolio 21 Global

Domini Impact Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Domini Impact Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Domini Impact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Portfolio 21 Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Portfolio 21 Global are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Portfolio 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 Portfolio

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

The idea behind Domini Impact Equity and Portfolio 21 Global 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.