Correlation Between Calvert Small and Calvert Global

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

By analyzing existing cross correlation between Calvert Small Cap and Calvert Global Water, you can compare the effects of market volatilities on Calvert Small and Calvert Global 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 Small with a short position of Calvert Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Small and Calvert Global.

Diversification Opportunities for Calvert Small and Calvert Global

0.38

Correlation Coefficient

Calvert Small  Calvert Global

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 Small Cap and Calvert Global Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Global Water and Calvert Small 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 Small Cap are associated (or correlated) with Calvert Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Global Water has no effect on the direction of Calvert Small i.e., Calvert Small and Calvert Global go up and down completely randomly.

Pair Corralation between Calvert Small and Calvert Global

Assuming the 90 days horizon Calvert Small Cap is expected to generate 0.58 times more return on investment than Calvert Global. However, Calvert Small Cap is 1.72 times less risky than Calvert Global. It trades about -0.37 of its potential returns per unit of risk. Calvert Global Water is currently generating about -0.38 per unit of risk. If you would invest  2,886  in Calvert Small Cap on October 13, 2024 and sell it today you would lose (220.00) from holding Calvert Small Cap or give up 7.62% of portfolio value over 90 days.

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

Calvert Small Cap  vs.  Calvert Global Water

Calvert Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Calvert Global Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Global Water 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 fundamental 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 Small and Calvert Global

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

The idea behind Calvert Small Cap and Calvert Global Water 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.