Correlation Between Eaton Vance and Parametric Intl

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

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

Diversification Opportunities for Eaton Vance and Parametric Intl

0.75

Correlation Coefficient

Eaton Vance  Parametric Intl

Poor diversification

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

Pair Corralation between Eaton Vance and Parametric Intl

Assuming the 90 days horizon Eaton Vance is expected to generate 6.74 times less return on investment than Parametric Intl. But when comparing it to its historical volatility, Eaton Vance Municipal is 2.84 times less risky than Parametric Intl. It trades about 0.19 of its potential returns per unit of risk. Parametric Intl Equity is currently generating about 0.46 of returns per unit of risk over similar time horizon. If you would invest  1,405  in Parametric Intl Equity on December 5, 2024 and sell it today you would earn a total of  99.00  from holding Parametric Intl Equity or generate 7.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Eaton Vance Municipal  vs.  Parametric Intl Equity

Eaton Vance Municipal

Risk-Adjusted Performance

Very Weak

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

Parametric Intl Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parametric Intl Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Parametric Intl is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eaton Vance and Parametric Intl

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

The idea behind Eaton Vance Municipal and Parametric Intl Equity 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.