Correlation Between Calvert Conservative and Vanguard Emerging

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

Diversification Opportunities for Calvert Conservative and Vanguard Emerging

0.79

Correlation Coefficient

Calvert Conservative  Vanguard Emerging

Poor diversification

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

Pair Corralation between Calvert Conservative and Vanguard Emerging

Assuming the 90 days horizon Calvert Conservative is expected to generate 1.2 times less return on investment than Vanguard Emerging. But when comparing it to its historical volatility, Calvert Conservative Allocation is 2.32 times less risky than Vanguard Emerging. It trades about 0.09 of its potential returns per unit of risk. Vanguard Emerging Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,822  in Vanguard Emerging Markets on December 2, 2024 and sell it today you would earn a total of  373.00  from holding Vanguard Emerging Markets or generate 20.47% 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.  Vanguard Emerging Markets

Calvert Conservative

Risk-Adjusted Performance

Weak

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

Vanguard Emerging Markets

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Emerging 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 Conservative and Vanguard Emerging

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

The idea behind Calvert Conservative Allocation and Vanguard Emerging Markets 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.

Check out your portfolio center.

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.