Correlation Between Calvert Global and Calvert Small

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

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

Diversification Opportunities for Calvert Global and Calvert Small

0.59

Correlation Coefficient

Calvert Global  Calvert Small

Very weak diversification

The 3 months correlation between Calvert and Calvert is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Global Water and Calvert Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Small Cap and Calvert Global 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 Global Water are associated (or correlated) with Calvert Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Small Cap has no effect on the direction of Calvert Global i.e., Calvert Global and Calvert Small go up and down completely randomly.

Pair Corralation between Calvert Global and Calvert Small

Assuming the 90 days horizon Calvert Global is expected to generate 2.45 times less return on investment than Calvert Small. But when comparing it to its historical volatility, Calvert Global Water is 1.12 times less risky than Calvert Small. It trades about 0.01 of its potential returns per unit of risk. Calvert Small Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,419  in Calvert Small Cap on October 13, 2024 and sell it today you would earn a total of  247.00  from holding Calvert Small Cap or generate 10.21% return on investment over 90 days.

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

Calvert Global Water  vs.  Calvert Small Cap

Calvert Global Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Global Water has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Calvert Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Calvert Global Water and Calvert Small 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.