Correlation Between Small Cap and Calvert Large

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

By analyzing existing cross correlation between Small Cap Core and Calvert Large Cap, you can compare the effects of market volatilities on Small Cap and Calvert Large 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 Small Cap with a short position of Calvert Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Calvert Large.

Diversification Opportunities for Small Cap and Calvert Large

0.38

Correlation Coefficient

Small Cap  Calvert Large

Weak diversification

The 3 months correlation between Small and Calvert is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Calvert Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Large Cap and Small Cap 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 Small Cap Core are associated (or correlated) with Calvert Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Large Cap has no effect on the direction of Small Cap i.e., Small Cap and Calvert Large go up and down completely randomly.

Pair Corralation between Small Cap and Calvert Large

Assuming the 90 days horizon Small Cap is expected to generate 1.27 times less return on investment than Calvert Large. In addition to that, Small Cap is 13.39 times more volatile than Calvert Large Cap. It trades about 0.01 of its total potential returns per unit of risk. Calvert Large Cap is currently generating about 0.14 per unit of volatility. If you would invest  936.00  in Calvert Large Cap on October 9, 2024 and sell it today you would earn a total of  35.00  from holding Calvert Large Cap or generate 3.74% return on investment over 90 days.

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

Small Cap Core  vs.  Calvert Large Cap

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Calvert Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Small Cap and Calvert Large

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

The idea behind Small Cap Core and Calvert Large Cap 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.