Correlation Between California High and Domini Impact

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

By analyzing existing cross correlation between California High Yield Municipal and Domini Impact Equity, you can compare the effects of market volatilities on California High 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 California High with a short position of Domini Impact. Check out your portfolio center. Please also check ongoing floating volatility patterns of California High and Domini Impact.

Diversification Opportunities for California High and Domini Impact

0.15

Correlation Coefficient

California High  Domini Impact

Average diversification

The 3 months correlation between California and Domini is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding California High Yield Municipa and Domini Impact Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Domini Impact Equity and California High 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 California High Yield Municipal 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 Equity has no effect on the direction of California High i.e., California High and Domini Impact go up and down completely randomly.

Pair Corralation between California High and Domini Impact

Assuming the 90 days horizon California High is expected to generate 18.87 times less return on investment than Domini Impact. But when comparing it to its historical volatility, California High Yield Municipal is 2.66 times less risky than Domini Impact. It trades about 0.03 of its potential returns per unit of risk. Domini Impact Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,746  in Domini Impact Equity on September 13, 2024 and sell it today you would earn a total of  304.00  from holding Domini Impact Equity or generate 8.12% return on investment over 90 days.

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

California High Yield Municipa  vs.  Domini Impact Equity

California High Yield

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California High Yield Municipal are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, California High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Domini Impact Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Domini Impact Equity are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Domini Impact may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with California High and Domini Impact

The main advantage of trading using opposite California High and Domini Impact positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California High 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 California High Yield Municipal and Domini Impact Equity 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..