Correlation Between Impact ISR and R Co

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

By analyzing existing cross correlation between Impact ISR Performance and R co Valor F, you can compare the effects of market volatilities on Impact ISR and R Co 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 Impact ISR with a short position of R Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Impact ISR and R Co.

Diversification Opportunities for Impact ISR and R Co

-0.37

Correlation Coefficient

Impact ISR  R Co

Very good diversification

The 3 months correlation between Impact and 0P00017SX2 is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Impact ISR Performance and R co Valor F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R co Valor and Impact ISR 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 Impact ISR Performance are associated (or correlated) with R Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R co Valor has no effect on the direction of Impact ISR i.e., Impact ISR and R Co go up and down completely randomly.

Pair Corralation between Impact ISR and R Co

Assuming the 90 days trading horizon Impact ISR Performance is expected to under-perform the R Co. But the fund apears to be less risky and, when comparing its historical volatility, Impact ISR Performance is 1.05 times less risky than R Co. The fund trades about -0.02 of its potential returns per unit of risk. The R co Valor F is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  280,325  in R co Valor F on September 15, 2024 and sell it today you would earn a total of  31,528  from holding R co Valor F or generate 11.25% return on investment over 90 days.

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

Impact ISR Performance  vs.  R co Valor F

Impact ISR Performance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Impact ISR Performance has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly stable basic indicators, Impact ISR is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

R co Valor

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat fragile basic indicators, R Co may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Impact ISR and R Co

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

The idea behind Impact ISR Performance and R co Valor F 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.