Correlation Between Domini International and Domini Impact
Can any of the company-specific risk be diversified away by investing in both Domini International and Domini Impact 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 International and Domini Impact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Domini International Opportunities and Domini Impact Bond, you can compare the effects of market volatilities on Domini International and Domini Impact 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 International with a short position of Domini Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of Domini International and Domini Impact.
Diversification Opportunities for Domini International and Domini Impact
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Domini and Domini is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Domini International Opportuni and Domini Impact Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Domini Impact Bond and Domini International 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 International Opportunities are associated (or correlated) with Domini Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Domini Impact Bond has no effect on the direction of Domini International i.e., Domini International and Domini Impact go up and down completely randomly.
Pair Corralation between Domini International and Domini Impact
Assuming the 90 days horizon Domini International Opportunities is expected to under-perform the Domini Impact. In addition to that, Domini International is 2.3 times more volatile than Domini Impact Bond. It trades about -0.03 of its total potential returns per unit of risk. Domini Impact Bond is currently generating about 0.08 per unit of volatility. If you would invest 1,003 in Domini Impact Bond on September 1, 2024 and sell it today you would earn a total of 6.00 from holding Domini Impact Bond or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Domini International Opportuni vs. Domini Impact Bond
Performance |
| Timeline |
| Domini International |
| Domini Impact Bond |
Domini International and Domini Impact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Domini International and Domini Impact
The main advantage of trading using opposite Domini International and Domini Impact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Domini International position performs unexpectedly, Domini Impact 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 Domini Impact will offset losses from the drop in Domini Impact's long position.The idea behind Domini International Opportunities and Domini Impact Bond 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.
| Domini Impact vs. Domini Impact Equity | Domini Impact vs. Domini Sustainable Solutions | Domini Impact vs. Domini Impact International | Domini Impact vs. Domini Impact Bond |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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