Correlation Between Eaton Vance and Royce Value

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

By analyzing existing cross correlation between Eaton Vance Tax and Royce Value Closed, you can compare the effects of market volatilities on Eaton Vance and Royce Value 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 Royce Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Royce Value.

Diversification Opportunities for Eaton Vance and Royce Value

0.74

Correlation Coefficient

Eaton Vance  Royce Value

Poor diversification

The 3 months correlation between Eaton and Royce is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Tax and Royce Value Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Value Closed 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 Tax are associated (or correlated) with Royce Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Value Closed has no effect on the direction of Eaton Vance i.e., Eaton Vance and Royce Value go up and down completely randomly.

Pair Corralation between Eaton Vance and Royce Value

Considering the 90-day investment horizon Eaton Vance is expected to generate 4.19 times less return on investment than Royce Value. But when comparing it to its historical volatility, Eaton Vance Tax is 1.71 times less risky than Royce Value. It trades about 0.07 of its potential returns per unit of risk. Royce Value Closed is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,478  in Royce Value Closed on August 31, 2024 and sell it today you would earn a total of  186.00  from holding Royce Value Closed or generate 12.58% return on investment over 90 days.

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

Eaton Vance Tax  vs.  Royce Value Closed

Eaton Vance Tax

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Tax are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Eaton Vance is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Royce Value Closed

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Value Closed are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Royce Value may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Eaton Vance and Royce Value

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

The idea behind Eaton Vance Tax and Royce Value Closed 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.