Correlation Between Calvert Moderate and Pacific Capital

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

Diversification Opportunities for Calvert Moderate and Pacific Capital

0.63

Correlation Coefficient

Calvert Moderate  Pacific Capital

Poor diversification

The 3 months correlation between Calvert and Pacific is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Moderate Allocation and Pacific Capital Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Capital Tax 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 Pacific Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Capital Tax has no effect on the direction of Calvert Moderate i.e., Calvert Moderate and Pacific Capital go up and down completely randomly.

Pair Corralation between Calvert Moderate and Pacific Capital

Assuming the 90 days horizon Calvert Moderate Allocation is expected to under-perform the Pacific Capital. In addition to that, Calvert Moderate is 2.72 times more volatile than Pacific Capital Tax Free. It trades about -0.08 of its total potential returns per unit of risk. Pacific Capital Tax Free is currently generating about -0.04 per unit of volatility. If you would invest  963.00  in Pacific Capital Tax Free on October 11, 2024 and sell it today you would lose (5.00) from holding Pacific Capital Tax Free or give up 0.52% of portfolio value over 90 days.

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

Calvert Moderate Allocation  vs.  Pacific Capital Tax Free

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.

Pacific Capital Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacific Capital Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Pacific Capital 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 Moderate and Pacific Capital

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

The idea behind Calvert Moderate Allocation and Pacific Capital Tax Free 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.