Correlation Between Mirova Global and Energy Basic

Can any of the company-specific risk be diversified away by investing in both Mirova Global and Energy Basic 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 Mirova Global and Energy Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mirova Global Green and Energy Basic Materials, you can compare the effects of market volatilities on Mirova Global and Energy Basic 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 Mirova Global with a short position of Energy Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mirova Global and Energy Basic.

Diversification Opportunities for Mirova Global and Energy Basic

-0.11

Correlation Coefficient

Mirova Global  Energy Basic

Good diversification

The 3 months correlation between Mirova and Energy is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mirova Global Green and Energy Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Basic Materials and Mirova Global 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 Mirova Global Green are associated (or correlated) with Energy Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Basic Materials has no effect on the direction of Mirova Global i.e., Mirova Global and Energy Basic go up and down completely randomly.

Pair Corralation between Mirova Global and Energy Basic

Assuming the 90 days horizon Mirova Global Green is expected to under-perform the Energy Basic. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mirova Global Green is 3.07 times less risky than Energy Basic. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Energy Basic Materials is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  931.00  in Energy Basic Materials on December 26, 2024 and sell it today you would earn a total of  63.00  from holding Energy Basic Materials or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Mirova Global Green  vs.  Energy Basic Materials

Mirova Global Green

Risk-Adjusted Performance

Very Weak

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

Energy Basic Materials

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Basic Materials are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Energy Basic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mirova Global and Energy Basic

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

The idea behind Mirova Global Green and Energy Basic Materials 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.