Correlation Between Calvert Global and American Funds

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

By analyzing existing cross correlation between Calvert Global Equity and American Funds New, you can compare the effects of market volatilities on Calvert Global and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Global and American Funds.

Diversification Opportunities for Calvert Global and American Funds

0.72

Correlation Coefficient

Calvert Global  American Funds

Poor diversification

The 3 months correlation between Calvert and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Global Equity and American Funds New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds New 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 Equity are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds New has no effect on the direction of Calvert Global i.e., Calvert Global and American Funds go up and down completely randomly.

Pair Corralation between Calvert Global and American Funds

Assuming the 90 days horizon Calvert Global Equity is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert Global Equity is 1.09 times less risky than American Funds. The mutual fund trades about -0.05 of its potential returns per unit of risk. The American Funds New is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  6,226  in American Funds New on December 30, 2024 and sell it today you would lose (126.00) from holding American Funds New or give up 2.02% of portfolio value over 90 days.

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

Calvert Global Equity  vs.  American Funds New

Calvert Global Equity

Risk-Adjusted Performance

Very Weak

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

American Funds New

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Funds New has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, American Funds 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 American Funds

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

The idea behind Calvert Global Equity and American Funds New 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.