Correlation Between Calvert High and Calvert Short

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

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

Diversification Opportunities for Calvert High and Calvert Short

0.68

Correlation Coefficient

Calvert High  Calvert Short

Poor diversification

The 3 months correlation between Calvert and Calvert is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Calvert High Yield and Calvert Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Short Duration and Calvert High 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 High Yield are associated (or correlated) with Calvert Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Short Duration has no effect on the direction of Calvert High i.e., Calvert High and Calvert Short go up and down completely randomly.

Pair Corralation between Calvert High and Calvert Short

Assuming the 90 days horizon Calvert High Yield is expected to under-perform the Calvert Short. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert High Yield is 1.02 times less risky than Calvert Short. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Calvert Short Duration is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,566  in Calvert Short Duration on September 27, 2024 and sell it today you would earn a total of  3.00  from holding Calvert Short Duration or generate 0.19% return on investment over 90 days.

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

Calvert High Yield  vs.  Calvert Short Duration

Calvert High Yield

Risk-Adjusted Performance

0 of 100

Very Weak

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

Calvert Short Duration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Short Duration has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Calvert Short 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 High and Calvert Short

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

The idea behind Calvert High Yield and Calvert Short Duration 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.