Correlation Between Calvert Conservative and Principal Lifetime

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

By analyzing existing cross correlation between Calvert Conservative Allocation and Principal Lifetime 2040, you can compare the effects of market volatilities on Calvert Conservative and Principal Lifetime 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 Conservative with a short position of Principal Lifetime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Conservative and Principal Lifetime.

Diversification Opportunities for Calvert Conservative and Principal Lifetime

0.79

Correlation Coefficient

Calvert Conservative  Principal Lifetime

Poor diversification

The 3 months correlation between Calvert and Principal is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Conservative Allocatio and Principal Lifetime 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Lifetime 2040 and Calvert Conservative 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 Conservative Allocation are associated (or correlated) with Principal Lifetime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Lifetime 2040 has no effect on the direction of Calvert Conservative i.e., Calvert Conservative and Principal Lifetime go up and down completely randomly.

Pair Corralation between Calvert Conservative and Principal Lifetime

Assuming the 90 days horizon Calvert Conservative is expected to generate 1.22 times less return on investment than Principal Lifetime. But when comparing it to its historical volatility, Calvert Conservative Allocation is 1.74 times less risky than Principal Lifetime. It trades about 0.06 of its potential returns per unit of risk. Principal Lifetime 2040 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,352  in Principal Lifetime 2040 on October 4, 2024 and sell it today you would earn a total of  185.00  from holding Principal Lifetime 2040 or generate 13.68% return on investment over 90 days.

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

Calvert Conservative Allocatio  vs.  Principal Lifetime 2040

Calvert Conservative

Risk-Adjusted Performance

0 of 100

Very Weak

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

Principal Lifetime 2040

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Principal Lifetime 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Calvert Conservative and Principal Lifetime

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

The idea behind Calvert Conservative Allocation and Principal Lifetime 2040 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.