Correlation Between Calvert Small and Calvert Large

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

Diversification Opportunities for Calvert Small and Calvert Large

0.94

Correlation Coefficient

Calvert Small  Calvert Large

Almost no diversification

The 3 months correlation between Calvert and Calvert is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Small Cap and Calvert Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Large Cap has no effect on the direction of Calvert Small i.e., Calvert Small and Calvert Large go up and down completely randomly.

Pair Corralation between Calvert Small and Calvert Large

Assuming the 90 days horizon Calvert Small Cap is expected to generate 1.51 times more return on investment than Calvert Large. However, Calvert Small is 1.51 times more volatile than Calvert Large Cap. It trades about 0.16 of its potential returns per unit of risk. Calvert Large Cap is currently generating about 0.2 per unit of risk. If you would invest  3,569  in Calvert Small Cap on September 12, 2024 and sell it today you would earn a total of  393.00  from holding Calvert Small Cap or generate 11.01% return on investment over 90 days.

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

Calvert Small Cap  vs.  Calvert Large Cap

Calvert Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Calvert Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Calvert Large Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Calvert Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Calvert Small and Calvert Large

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

The idea behind Calvert Small Cap and Calvert Large Cap 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.