Correlation Between Calvert Focused and Absolute Convertible

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

By analyzing existing cross correlation between Calvert Focused Value and Absolute Convertible Arbitrage, you can compare the effects of market volatilities on Calvert Focused and Absolute Convertible 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 Focused with a short position of Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Focused and Absolute Convertible.

Diversification Opportunities for Calvert Focused and Absolute Convertible

0.7

Correlation Coefficient

Calvert Focused  Absolute Convertible

Poor diversification

The 3 months correlation between Calvert and Absolute is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Focused Value and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Calvert Focused 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 Focused Value are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Calvert Focused i.e., Calvert Focused and Absolute Convertible go up and down completely randomly.

Pair Corralation between Calvert Focused and Absolute Convertible

Assuming the 90 days horizon Calvert Focused Value is expected to under-perform the Absolute Convertible. In addition to that, Calvert Focused is 2.75 times more volatile than Absolute Convertible Arbitrage. It trades about -0.31 of its total potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about -0.31 per unit of volatility. If you would invest  1,151  in Absolute Convertible Arbitrage on October 10, 2024 and sell it today you would lose (33.00) from holding Absolute Convertible Arbitrage or give up 2.87% of portfolio value over 90 days.

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

Calvert Focused Value  vs.  Absolute Convertible Arbitrage

Calvert Focused Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Absolute Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Absolute Convertible Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Absolute Convertible 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 Focused and Absolute Convertible

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

The idea behind Calvert Focused Value and Absolute Convertible Arbitrage 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.