Correlation Between Calvert Small and Calvert Balanced

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

Diversification Opportunities for Calvert Small and Calvert Balanced

0.94

Correlation Coefficient

Calvert Small  Calvert Balanced

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

Pair Corralation between Calvert Small and Calvert Balanced

Assuming the 90 days horizon Calvert Small Cap is expected to under-perform the Calvert Balanced. In addition to that, Calvert Small is 1.39 times more volatile than Calvert Balanced Portfolio. It trades about -0.07 of its total potential returns per unit of risk. Calvert Balanced Portfolio is currently generating about -0.08 per unit of volatility. If you would invest  4,272  in Calvert Balanced Portfolio on December 30, 2024 and sell it today you would lose (162.00) from holding Calvert Balanced Portfolio or give up 3.79% of portfolio value 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 Balanced Portfolio

Calvert Small Cap

Risk-Adjusted Performance

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 forward 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 Balanced Por

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calvert Balanced Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Calvert Balanced 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 Small and Calvert Balanced

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

The idea behind Calvert Small Cap and Calvert Balanced Portfolio 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .