Correlation Between Total Return and Domini Impact
Can any of the company-specific risk be diversified away by investing in both Total Return 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 Total Return and Domini Impact into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Domini Impact Bond, you can compare the effects of market volatilities on Total Return 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 Total Return with a short position of Domini Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Domini Impact.
Diversification Opportunities for Total Return and Domini Impact
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Total and Domini is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund 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 Total Return 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 Total Return Fund 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 Total Return i.e., Total Return and Domini Impact go up and down completely randomly.
Pair Corralation between Total Return and Domini Impact
Assuming the 90 days horizon Total Return Fund is expected to generate 1.05 times more return on investment than Domini Impact. However, Total Return is 1.05 times more volatile than Domini Impact Bond. It trades about 0.07 of its potential returns per unit of risk. Domini Impact Bond is currently generating about 0.04 per unit of risk. If you would invest 856.00 in Total Return Fund on August 28, 2024 and sell it today you would earn a total of 5.00 from holding Total Return Fund or generate 0.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Domini Impact Bond
Performance |
| Timeline |
| Total Return |
| Domini Impact Bond |
Total Return and Domini Impact Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Domini Impact
The main advantage of trading using opposite Total Return and Domini Impact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return 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.| Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide | Total Return vs. Pimco Rae Worldwide |
| Domini Impact vs. Domini Impact Equity | Domini Impact vs. Domini Sustainable Solutions | Domini Impact vs. Domini Impact International | Domini Impact vs. Domini Impact International |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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