Correlation Between Portfolio and New Alternatives

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

By analyzing existing cross correlation between Portfolio 21 Global and New Alternatives Fund, you can compare the effects of market volatilities on Portfolio and New Alternatives 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 Portfolio with a short position of New Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portfolio and New Alternatives.

Diversification Opportunities for Portfolio and New Alternatives

-0.46

Correlation Coefficient

Portfolio  New Alternatives

Very good diversification

The 3 months correlation between Portfolio and New is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Portfolio 21 Global and New Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Alternatives and Portfolio 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 Portfolio 21 Global are associated (or correlated) with New Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Alternatives has no effect on the direction of Portfolio i.e., Portfolio and New Alternatives go up and down completely randomly.

Pair Corralation between Portfolio and New Alternatives

Assuming the 90 days horizon Portfolio 21 Global is expected to under-perform the New Alternatives. But the mutual fund apears to be less risky and, when comparing its historical volatility, Portfolio 21 Global is 1.12 times less risky than New Alternatives. The mutual fund trades about -0.04 of its potential returns per unit of risk. The New Alternatives Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,067  in New Alternatives Fund on December 29, 2024 and sell it today you would earn a total of  386.00  from holding New Alternatives Fund or generate 6.36% return on investment over 90 days.

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

Portfolio 21 Global  vs.  New Alternatives Fund

Portfolio 21 Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Portfolio 21 Global has generated negative risk-adjusted returns adding no value to fund investors. 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.

New Alternatives

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Alternatives Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, New Alternatives may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Portfolio and New Alternatives

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

The idea behind Portfolio 21 Global and New Alternatives Fund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.