Correlation Between Sierra Core and Calvert Moderate

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

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

Diversification Opportunities for Sierra Core and Calvert Moderate

0.85

Correlation Coefficient

Sierra Core  Calvert Moderate

Very poor diversification

The 3 months correlation between Sierra and Calvert is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Calvert Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Moderate All and Sierra Core 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 Sierra E Retirement are associated (or correlated) with Calvert Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Moderate All has no effect on the direction of Sierra Core i.e., Sierra Core and Calvert Moderate go up and down completely randomly.

Pair Corralation between Sierra Core and Calvert Moderate

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Calvert Moderate. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra E Retirement is 1.5 times less risky than Calvert Moderate. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Calvert Moderate Allocation is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,035  in Calvert Moderate Allocation on December 29, 2024 and sell it today you would lose (19.00) from holding Calvert Moderate Allocation or give up 0.93% of portfolio value over 90 days.

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

Sierra E Retirement  vs.  Calvert Moderate Allocation

Sierra E Retirement

Risk-Adjusted Performance

Very Weak

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

Calvert Moderate All

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sierra Core and Calvert Moderate

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

The idea behind Sierra E Retirement and Calvert Moderate Allocation 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.