Correlation Between Calvert Moderate and Federated Kaufmann

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

Diversification Opportunities for Calvert Moderate and Federated Kaufmann

0.39

Correlation Coefficient

Calvert Moderate  Federated Kaufmann

Weak diversification

The 3 months correlation between Calvert and Federated is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Moderate Allocation and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large 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 Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Calvert Moderate i.e., Calvert Moderate and Federated Kaufmann go up and down completely randomly.

Pair Corralation between Calvert Moderate and Federated Kaufmann

Assuming the 90 days horizon Calvert Moderate Allocation is expected to under-perform the Federated Kaufmann. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert Moderate Allocation is 1.68 times less risky than Federated Kaufmann. The mutual fund trades about -0.29 of its potential returns per unit of risk. The Federated Kaufmann Large is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,698  in Federated Kaufmann Large on October 11, 2024 and sell it today you would lose (30.00) from holding Federated Kaufmann Large or give up 1.77% of portfolio value over 90 days.

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

Calvert Moderate Allocation  vs.  Federated Kaufmann Large

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.

Federated Kaufmann Large

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Kaufmann Large 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 basic 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 Federated Kaufmann

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

The idea behind Calvert Moderate Allocation and Federated Kaufmann Large 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.