Correlation Between Vanguard Short-term and Calvert Short

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

By analyzing existing cross correlation between Vanguard Short Term Federal and Calvert Short Duration, you can compare the effects of market volatilities on Vanguard Short-term and Calvert Short 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 Short-term with a short position of Calvert Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short-term and Calvert Short.

Diversification Opportunities for Vanguard Short-term and Calvert Short

0.99

Correlation Coefficient

Vanguard Short-term  Calvert Short

No risk reduction

The 3 months correlation between Vanguard and Calvert is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Federal and Calvert Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Short Duration and Vanguard Short-term 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 Short Term Federal are associated (or correlated) with Calvert Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Short Duration has no effect on the direction of Vanguard Short-term i.e., Vanguard Short-term and Calvert Short go up and down completely randomly.

Pair Corralation between Vanguard Short-term and Calvert Short

Assuming the 90 days horizon Vanguard Short Term Federal is expected to generate 1.18 times more return on investment than Calvert Short. However, Vanguard Short-term is 1.18 times more volatile than Calvert Short Duration. It trades about 0.04 of its potential returns per unit of risk. Calvert Short Duration is currently generating about -0.06 per unit of risk. If you would invest  1,024  in Vanguard Short Term Federal on December 30, 2024 and sell it today you would earn a total of  1.00  from holding Vanguard Short Term Federal or generate 0.1% return on investment over 90 days.

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

Vanguard Short Term Federal  vs.  Calvert Short Duration

Vanguard Short Term

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Federal are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Vanguard Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calvert Short Duration

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Short Duration are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Calvert Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Short-term and Calvert Short

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

The idea behind Vanguard Short Term Federal and Calvert Short Duration 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.