Correlation Between Calvert Large and Calvert Small

Can any of the company-specific risk be diversified away by investing in both Calvert Large 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 Large 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 Large Cap and Calvert Small Cap, you can compare the effects of market volatilities on Calvert Large 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 Large with a short position of Calvert Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Large and Calvert Small.

Diversification Opportunities for Calvert Large and Calvert Small

0.95

Correlation Coefficient

Calvert Large  Calvert Small

Almost no diversification

The 3 months correlation between Calvert and Calvert is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Large Cap 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 Large 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 Large Cap 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 Large i.e., Calvert Large and Calvert Small go up and down completely randomly.

Pair Corralation between Calvert Large and Calvert Small

Assuming the 90 days horizon Calvert Large Cap is expected to generate 0.84 times more return on investment than Calvert Small. However, Calvert Large Cap is 1.18 times less risky than Calvert Small. It trades about 0.12 of its potential returns per unit of risk. Calvert Small Cap is currently generating about 0.05 per unit of risk. If you would invest  3,264  in Calvert Large Cap on September 16, 2024 and sell it today you would earn a total of  1,990  from holding Calvert Large Cap or generate 60.97% return on investment over 90 days.

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

Calvert Large Cap  vs.  Calvert Small Cap

Calvert Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Calvert Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Calvert Small Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. 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 Large and Calvert Small

The main advantage of trading using opposite Calvert Large and Calvert Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Large 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 Large Cap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.