Correlation Between Vanguard Health and Eaton Vance

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Can any of the company-specific risk be diversified away by investing in both Vanguard Health 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 Vanguard Health and Eaton Vance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and Eaton Vance Balanced, you can compare the effects of market volatilities on Vanguard Health 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 Vanguard Health with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and Eaton Vance.

Diversification Opportunities for Vanguard Health and Eaton Vance

0.35
  Correlation Coefficient

Weak diversification

The 3 months correlation between Vanguard and Eaton is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and Eaton Vance Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Balanced and Vanguard Health 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 Vanguard Health Care 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 Balanced has no effect on the direction of Vanguard Health i.e., Vanguard Health and Eaton Vance go up and down completely randomly.

Pair Corralation between Vanguard Health and Eaton Vance

Assuming the 90 days horizon Vanguard Health Care is expected to under-perform the Eaton Vance. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Health Care is 1.05 times less risky than Eaton Vance. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Eaton Vance Balanced is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  1,213  in Eaton Vance Balanced on October 3, 2024 and sell it today you would lose (28.00) from holding Eaton Vance Balanced or give up 2.31% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy98.39%
ValuesDaily Returns

Vanguard Health Care  vs.  Eaton Vance Balanced

 Performance 
       Timeline  
Vanguard Health Care 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vanguard Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Eaton Vance Balanced 

Risk-Adjusted Performance

0 of 100

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

Vanguard Health and Eaton Vance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Health and Eaton Vance

The main advantage of trading using opposite Vanguard Health and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health 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 Vanguard Health Care and Eaton Vance Balanced 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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