Correlation Between Calvert Moderate and Hennessy Nerstone

Can any of the company-specific risk be diversified away by investing in both Calvert Moderate and Hennessy Nerstone 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 Hennessy Nerstone 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 Hennessy Nerstone Mid, you can compare the effects of market volatilities on Calvert Moderate and Hennessy Nerstone 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 Hennessy Nerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Moderate and Hennessy Nerstone.

Diversification Opportunities for Calvert Moderate and Hennessy Nerstone

0.44

Correlation Coefficient

Calvert Moderate  Hennessy Nerstone

Very weak diversification

The 3 months correlation between Calvert and Hennessy is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Moderate Allocation and Hennessy Nerstone Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Mid 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 Hennessy Nerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Mid has no effect on the direction of Calvert Moderate i.e., Calvert Moderate and Hennessy Nerstone go up and down completely randomly.

Pair Corralation between Calvert Moderate and Hennessy Nerstone

Assuming the 90 days horizon Calvert Moderate Allocation is expected to generate 0.64 times more return on investment than Hennessy Nerstone. However, Calvert Moderate Allocation is 1.55 times less risky than Hennessy Nerstone. It trades about -0.29 of its potential returns per unit of risk. Hennessy Nerstone Mid is currently generating about -0.28 per unit of risk. If you would invest  2,129  in Calvert Moderate Allocation on October 11, 2024 and sell it today you would lose (94.00) from holding Calvert Moderate Allocation or give up 4.42% of portfolio value over 90 days.

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

Calvert Moderate Allocation  vs.  Hennessy Nerstone Mid

Calvert Moderate All

Risk-Adjusted Performance

0 of 100

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.

Hennessy Nerstone Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Nerstone Mid 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 fundamental 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.

Pair Trading with Calvert Moderate and Hennessy Nerstone

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

The idea behind Calvert Moderate Allocation and Hennessy Nerstone Mid 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.