Correlation Between Calvert Small and Calvert Large

Can any of the company-specific risk be diversified away by investing in both Calvert Small and Calvert Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on Calvert Small and Calvert Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Small and Calvert Large.

Diversification Opportunities for Calvert Small and Calvert Large

0.92

Correlation Coefficient

Calvert Small  Calvert Large

Almost no diversification

The 3 months correlation between Calvert and Calvert is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Small Cap and Calvert Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Large Cap has no effect on the direction of Calvert Small i.e., Calvert Small and Calvert Large go up and down completely randomly.

Pair Corralation between Calvert Small and Calvert Large

Assuming the 90 days horizon Calvert Small is expected to generate 1.96 times less return on investment than Calvert Large. In addition to that, Calvert Small is 1.18 times more volatile than Calvert Large Cap. It trades about 0.05 of its total potential returns per unit of risk. Calvert Large Cap is currently generating about 0.11 per unit of volatility. If you would invest  3,001  in Calvert Large Cap on September 26, 2024 and sell it today you would earn a total of  1,759  from holding Calvert Large Cap or generate 58.61% return on investment over 90 days.

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

Calvert Small Cap  vs.  Calvert Large Cap

Calvert Small Cap

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Small Cap are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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 Large Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Large Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Calvert Large 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 Large

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

The idea behind Calvert Small Cap and Calvert Large Cap 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.