Correlation Between Calvert Focused and Calvert Developed

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

Diversification Opportunities for Calvert Focused and Calvert Developed

0.38

Correlation Coefficient

Calvert Focused  Calvert Developed

Weak diversification

The 3 months correlation between Calvert and Calvert is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Focused Value and Calvert Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Developed Market 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 Calvert Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Developed Market has no effect on the direction of Calvert Focused i.e., Calvert Focused and Calvert Developed go up and down completely randomly.

Pair Corralation between Calvert Focused and Calvert Developed

Assuming the 90 days horizon Calvert Focused Value is expected to generate 1.2 times more return on investment than Calvert Developed. However, Calvert Focused is 1.2 times more volatile than Calvert Developed Market. It trades about -0.07 of its potential returns per unit of risk. Calvert Developed Market is currently generating about -0.17 per unit of risk. If you would invest  1,191  in Calvert Focused Value on October 1, 2024 and sell it today you would lose (51.00) from holding Calvert Focused Value or give up 4.28% of portfolio value over 90 days.

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

Calvert Focused Value  vs.  Calvert Developed Market

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.

Calvert Developed Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Developed Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Calvert Focused and Calvert Developed

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

The idea behind Calvert Focused Value and Calvert Developed Market 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.