Correlation Between Parametric International and Eaton Vance

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

By analyzing existing cross correlation between Parametric International Equity and Eaton Vance Tax Managed, you can compare the effects of market volatilities on Parametric International and Eaton Vance 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 Parametric International with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parametric International and Eaton Vance.

Diversification Opportunities for Parametric International and Eaton Vance

-0.75

Correlation Coefficient

Parametric International  Eaton Vance

Pay attention - limited upside

The 3 months correlation between Parametric and Eaton is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Parametric International Equit and Eaton Vance Tax Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Tax and Parametric International 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 Parametric International Equity are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Tax has no effect on the direction of Parametric International i.e., Parametric International and Eaton Vance go up and down completely randomly.

Pair Corralation between Parametric International and Eaton Vance

Assuming the 90 days horizon Parametric International is expected to generate 1.03 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, Parametric International Equity is 1.42 times less risky than Eaton Vance. It trades about 0.19 of its potential returns per unit of risk. Eaton Vance Tax Managed is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,403  in Eaton Vance Tax Managed on September 16, 2024 and sell it today you would earn a total of  67.00  from holding Eaton Vance Tax Managed or generate 1.97% return on investment over 90 days.

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

Parametric International Equit  vs.  Eaton Vance Tax Managed

Parametric International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eaton Vance Tax

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Tax Managed are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Eaton Vance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parametric International and Eaton Vance

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

The idea behind Parametric International Equity and Eaton Vance Tax Managed 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.