Correlation Between Calvert Long and Calvert Short

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

By analyzing existing cross correlation between Calvert Long Term Income and Calvert Short Duration, you can compare the effects of market volatilities on Calvert Long and Calvert Short 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 Long with a short position of Calvert Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Long and Calvert Short.

Diversification Opportunities for Calvert Long and Calvert Short

0.88

Correlation Coefficient

Calvert Long  Calvert Short

Very poor diversification

The 3 months correlation between Calvert and Calvert is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Long Term Income and Calvert Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Short Duration and Calvert Long 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 Long Term Income are associated (or correlated) with Calvert Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Short Duration has no effect on the direction of Calvert Long i.e., Calvert Long and Calvert Short go up and down completely randomly.

Pair Corralation between Calvert Long and Calvert Short

Assuming the 90 days horizon Calvert Long Term Income is expected to under-perform the Calvert Short. In addition to that, Calvert Long is 3.38 times more volatile than Calvert Short Duration. It trades about -0.18 of its total potential returns per unit of risk. Calvert Short Duration is currently generating about -0.11 per unit of volatility. If you would invest  1,572  in Calvert Short Duration on September 25, 2024 and sell it today you would lose (3.00) from holding Calvert Short Duration or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Calvert Long Term Income  vs.  Calvert Short Duration

Calvert Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Calvert Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Short Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Calvert Short 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 Long and Calvert Short

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

The idea behind Calvert Long Term Income and Calvert Short Duration 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.