Correlation Between Calvert Developed and California Limited

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

By analyzing existing cross correlation between Calvert Developed Market and California Limited Term Tax Free, you can compare the effects of market volatilities on Calvert Developed and California Limited 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 Developed with a short position of California Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Developed and California Limited.

Diversification Opportunities for Calvert Developed and California Limited

0.35

Correlation Coefficient

Calvert Developed  California Limited

Weak diversification

The 3 months correlation between Calvert and California is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Developed Market and California Limited Term Tax Fr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Limited Term and Calvert Developed 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 Developed Market are associated (or correlated) with California Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Limited Term has no effect on the direction of Calvert Developed i.e., Calvert Developed and California Limited go up and down completely randomly.

Pair Corralation between Calvert Developed and California Limited

Assuming the 90 days horizon Calvert Developed Market is expected to under-perform the California Limited. In addition to that, Calvert Developed is 6.94 times more volatile than California Limited Term Tax Free. It trades about -0.05 of its total potential returns per unit of risk. California Limited Term Tax Free is currently generating about 0.01 per unit of volatility. If you would invest  1,019  in California Limited Term Tax Free on September 14, 2024 and sell it today you would earn a total of  1.00  from holding California Limited Term Tax Free or generate 0.1% return on investment over 90 days.

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

Calvert Developed Market  vs.  California Limited Term Tax Fr

Calvert Developed Market

Risk-Adjusted Performance

0 of 100

Very Weak

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

California Limited Term

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Limited Term Tax Free 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 Limited 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 Developed and California Limited

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

The idea behind Calvert Developed Market and California Limited Term Tax Free 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.