Correlation Between General American and Eaton Vance

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

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

Diversification Opportunities for General American and Eaton Vance

0.82

Correlation Coefficient

General American  Eaton Vance

Very poor diversification

The 3 months correlation between General and Eaton is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding General American Investors and Eaton Vance Tax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Tax and General American 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 General American Investors 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 General American i.e., General American and Eaton Vance go up and down completely randomly.

Pair Corralation between General American and Eaton Vance

Considering the 90-day investment horizon General American is expected to generate 4.95 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, General American Investors is 1.17 times less risky than Eaton Vance. It trades about 0.01 of its potential returns per unit of risk. Eaton Vance Tax is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,467  in Eaton Vance Tax on December 28, 2024 and sell it today you would earn a total of  43.00  from holding Eaton Vance Tax or generate 1.74% return on investment over 90 days.

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

General American Investors  vs.  Eaton Vance Tax

General American Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days General American Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, General American is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Eaton Vance Tax

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Tax are ranked lower than 3 (%) 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.

Pair Trading with General American and Eaton Vance

The main advantage of trading using opposite General American and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General American 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 General American Investors and Eaton Vance Tax 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.

Check out your portfolio center.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.