Correlation Between Calvert Small and Calvert Capital

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

By analyzing existing cross correlation between Calvert Small Cap and Calvert Capital Accumulation, you can compare the effects of market volatilities on Calvert Small and Calvert Capital 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 Calvert Small with a short position of Calvert Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Small and Calvert Capital.

Diversification Opportunities for Calvert Small and Calvert Capital

0.77

Correlation Coefficient

Calvert Small  Calvert Capital

Poor diversification

The 3 months correlation between Calvert and Calvert is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Small Cap and Calvert Capital Accumulation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Capital Accu and Calvert Small 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 Calvert Small Cap are associated (or correlated) with Calvert Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Capital Accu has no effect on the direction of Calvert Small i.e., Calvert Small and Calvert Capital go up and down completely randomly.

Pair Corralation between Calvert Small and Calvert Capital

Assuming the 90 days horizon Calvert Small Cap is expected to under-perform the Calvert Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert Small Cap is 1.16 times less risky than Calvert Capital. The mutual fund trades about -0.43 of its potential returns per unit of risk. The Calvert Capital Accumulation is currently generating about -0.36 of returns per unit of risk over similar time horizon. If you would invest  5,073  in Calvert Capital Accumulation on September 26, 2024 and sell it today you would lose (432.00) from holding Calvert Capital Accumulation or give up 8.52% of portfolio value over 90 days.

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

Calvert Small Cap  vs.  Calvert Capital Accumulation

Calvert Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Calvert Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calvert Capital Accu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Capital Accumulation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Calvert Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Calvert Small and Calvert Capital

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

The idea behind Calvert Small Cap and Calvert Capital Accumulation 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.