Correlation Between Calvert Equity and Calvert International

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

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

Diversification Opportunities for Calvert Equity and Calvert International

0.06

Correlation Coefficient

Calvert Equity  Calvert International

Significant diversification

The 3 months correlation between Calvert and Calvert is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Equity Portfolio and Calvert International Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert International and Calvert Equity 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 Equity Portfolio are associated (or correlated) with Calvert International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert International has no effect on the direction of Calvert Equity i.e., Calvert Equity and Calvert International go up and down completely randomly.

Pair Corralation between Calvert Equity and Calvert International

Assuming the 90 days horizon Calvert Equity Portfolio is expected to generate 0.67 times more return on investment than Calvert International. However, Calvert Equity Portfolio is 1.5 times less risky than Calvert International. It trades about 0.08 of its potential returns per unit of risk. Calvert International Equity is currently generating about -0.05 per unit of risk. If you would invest  10,045  in Calvert Equity Portfolio on September 4, 2024 and sell it today you would earn a total of  313.00  from holding Calvert Equity Portfolio or generate 3.12% return on investment over 90 days.

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

Calvert Equity Portfolio  vs.  Calvert International Equity

Calvert Equity Portfolio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Equity Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Calvert Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calvert International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Calvert International 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 Equity and Calvert International

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

The idea behind Calvert Equity Portfolio and Calvert International 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.