Correlation Between California Bond and Calvert Emerging

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

By analyzing existing cross correlation between California Bond Fund and Calvert Emerging Markets, you can compare the effects of market volatilities on California Bond and Calvert Emerging 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 California Bond with a short position of Calvert Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Calvert Emerging.

Diversification Opportunities for California Bond and Calvert Emerging

0.38

Correlation Coefficient

California Bond  Calvert Emerging

Weak diversification

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

Pair Corralation between California Bond and Calvert Emerging

Assuming the 90 days horizon California Bond is expected to generate 3.23 times less return on investment than Calvert Emerging. But when comparing it to its historical volatility, California Bond Fund is 3.25 times less risky than Calvert Emerging. It trades about 0.03 of its potential returns per unit of risk. Calvert Emerging Markets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,005  in Calvert Emerging Markets on October 24, 2024 and sell it today you would earn a total of  99.00  from holding Calvert Emerging Markets or generate 9.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.37%
Values	Daily Returns

California Bond Fund  vs.  Calvert Emerging Markets

California Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Calvert Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with California Bond and Calvert Emerging

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

The idea behind California Bond Fund and Calvert Emerging Markets 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.