Correlation Between Calvert Moderate and Calvert Developed

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

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

Diversification Opportunities for Calvert Moderate and Calvert Developed

0.29

Correlation Coefficient

Calvert Moderate  Calvert Developed

Modest diversification

The 3 months correlation between Calvert and Calvert is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Moderate Allocation and Calvert Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Developed Market and Calvert Moderate 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 Moderate Allocation are associated (or correlated) with Calvert Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Developed Market has no effect on the direction of Calvert Moderate i.e., Calvert Moderate and Calvert Developed go up and down completely randomly.

Pair Corralation between Calvert Moderate and Calvert Developed

Assuming the 90 days horizon Calvert Moderate Allocation is expected to under-perform the Calvert Developed. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert Moderate Allocation is 1.55 times less risky than Calvert Developed. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Calvert Developed Market is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,946  in Calvert Developed Market on December 30, 2024 and sell it today you would earn a total of  181.00  from holding Calvert Developed Market or generate 6.14% return on investment over 90 days.

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

Calvert Moderate Allocation  vs.  Calvert Developed Market

Calvert Moderate All

Risk-Adjusted Performance

Very Weak

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

Calvert Developed Market

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Developed Market are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Calvert Developed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Calvert Moderate and Calvert Developed

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

The idea behind Calvert Moderate Allocation and Calvert Developed Market 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.