Correlation Between Domini Impact and Portfolio

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

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

Diversification Opportunities for Domini Impact and Portfolio

0.51

Correlation Coefficient

Domini Impact  Portfolio

Very weak diversification

The 3 months correlation between Domini and Portfolio is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Domini Impact Bond and Portfolio 21 Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portfolio 21 Global and Domini Impact 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 Impact Bond are associated (or correlated) with Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portfolio 21 Global has no effect on the direction of Domini Impact i.e., Domini Impact and Portfolio go up and down completely randomly.

Pair Corralation between Domini Impact and Portfolio

Assuming the 90 days horizon Domini Impact is expected to generate 3.31 times less return on investment than Portfolio. But when comparing it to its historical volatility, Domini Impact Bond is 2.05 times less risky than Portfolio. It trades about 0.11 of its potential returns per unit of risk. Portfolio 21 Global is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  5,609  in Portfolio 21 Global on May 5, 2025 and sell it today you would earn a total of  378.00  from holding Portfolio 21 Global or generate 6.74% return on investment over 90 days.

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

Domini Impact Bond  vs.  Portfolio 21 Global

Domini Impact Bond

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Domini Impact Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Domini Impact is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Portfolio 21 Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Portfolio 21 Global are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Portfolio may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Domini Impact and Portfolio

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

The idea behind Domini Impact Bond and Portfolio 21 Global 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.