Correlation Between Tri Continental and Eaton Vance

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

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

Diversification Opportunities for Tri Continental and Eaton Vance

0.61

Correlation Coefficient

Tri Continental  Eaton Vance

Poor diversification

The 3 months correlation between Tri and Eaton is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tri Continental Closed 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 Tri Continental 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 Tri Continental Closed 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 Tri Continental i.e., Tri Continental and Eaton Vance go up and down completely randomly.

Pair Corralation between Tri Continental and Eaton Vance

Allowing for the 90-day total investment horizon Tri Continental Closed is expected to under-perform the Eaton Vance. But the stock apears to be less risky and, when comparing its historical volatility, Tri Continental Closed is 1.19 times less risky than Eaton Vance. The stock trades about -0.02 of its potential returns per unit of risk. The Eaton Vance Tax is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,826  in Eaton Vance Tax on December 26, 2024 and sell it today you would earn a total of  51.00  from holding Eaton Vance Tax or generate 2.79% return on investment over 90 days.

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

Tri Continental Closed  vs.  Eaton Vance Tax

Tri Continental Closed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tri Continental Closed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Tri Continental is not utilizing all of its potentials. The current stock price disturbance, 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 4 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly stable basic indicators, Eaton Vance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tri Continental and Eaton Vance

The main advantage of trading using opposite Tri Continental and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tri Continental 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 Tri Continental Closed 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.