Correlation Between Calvert Moderate and American Funds

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

Diversification Opportunities for Calvert Moderate and American Funds

0.9

Correlation Coefficient

Calvert Moderate  American Funds

Almost no diversification

The 3 months correlation between Calvert and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Moderate Allocation and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of Calvert Moderate i.e., Calvert Moderate and American Funds go up and down completely randomly.

Pair Corralation between Calvert Moderate and American Funds

Assuming the 90 days horizon Calvert Moderate is expected to generate 1.3 times less return on investment than American Funds. In addition to that, Calvert Moderate is 1.24 times more volatile than American Funds Retirement. It trades about 0.02 of its total potential returns per unit of risk. American Funds Retirement is currently generating about 0.04 per unit of volatility. If you would invest  1,263  in American Funds Retirement on October 24, 2024 and sell it today you would earn a total of  11.00  from holding American Funds Retirement or generate 0.87% return on investment over 90 days.

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

Calvert Moderate Allocation  vs.  American Funds Retirement

Calvert Moderate All

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Moderate Allocation are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

American Funds Retirement

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds 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 American Funds

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

The idea behind Calvert Moderate Allocation and American Funds Retirement 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.