Correlation Between Moderate Balanced and Calvert High

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

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

Diversification Opportunities for Moderate Balanced and Calvert High

0.62

Correlation Coefficient

Moderate Balanced  Calvert High

Poor diversification

The 3 months correlation between Moderate and Calvert is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Calvert High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert High Yield and Moderate Balanced 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 Moderate Balanced Allocation are associated (or correlated) with Calvert High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert High Yield has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Calvert High go up and down completely randomly.

Pair Corralation between Moderate Balanced and Calvert High

Assuming the 90 days horizon Moderate Balanced Allocation is expected to under-perform the Calvert High. In addition to that, Moderate Balanced is 5.51 times more volatile than Calvert High Yield. It trades about -0.25 of its total potential returns per unit of risk. Calvert High Yield is currently generating about -0.35 per unit of volatility. If you would invest  2,503  in Calvert High Yield on October 11, 2024 and sell it today you would lose (26.00) from holding Calvert High Yield or give up 1.04% of portfolio value over 90 days.

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

Moderate Balanced Allocation  vs.  Calvert High Yield

Moderate Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Calvert High Yield

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert High Yield are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Calvert High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Moderate Balanced and Calvert High

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

The idea behind Moderate Balanced Allocation and Calvert High Yield 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.