Correlation Between Calvert Developed and Vanguard Developed
Can any of the company-specific risk be diversified away by investing in both Calvert Developed and Vanguard Developed 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 Calvert Developed and Vanguard Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Calvert Developed Market and Vanguard Developed Markets, you can compare the effects of market volatilities on Calvert Developed and Vanguard Developed 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 Calvert Developed with a short position of Vanguard Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Developed and Vanguard Developed.
Diversification Opportunities for Calvert Developed and Vanguard Developed
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Calvert and Vanguard is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Developed Market and Vanguard Developed Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Developed and Calvert Developed 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 Calvert Developed Market are associated (or correlated) with Vanguard Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Developed has no effect on the direction of Calvert Developed i.e., Calvert Developed and Vanguard Developed go up and down completely randomly.
Pair Corralation between Calvert Developed and Vanguard Developed
Assuming the 90 days horizon Calvert Developed Market is expected to generate 1.02 times more return on investment than Vanguard Developed. However, Calvert Developed is 1.02 times more volatile than Vanguard Developed Markets. It trades about 0.01 of its potential returns per unit of risk. Vanguard Developed Markets is currently generating about 0.0 per unit of risk. If you would invest 3,112 in Calvert Developed Market on September 3, 2024 and sell it today you would earn a total of 14.00 from holding Calvert Developed Market or generate 0.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Calvert Developed Market vs. Vanguard Developed Markets
Performance |
| Timeline |
| Calvert Developed Market |
| Vanguard Developed |
Calvert Developed and Vanguard Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Calvert Developed and Vanguard Developed
The main advantage of trading using opposite Calvert Developed and Vanguard Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Developed position performs unexpectedly, Vanguard Developed 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 Vanguard Developed will offset losses from the drop in Vanguard Developed's long position.The idea behind Calvert Developed Market and Vanguard Developed 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.
| Vanguard Developed vs. Vanguard Emerging Markets | Vanguard Developed vs. Vanguard Small Cap Index | Vanguard Developed vs. Vanguard Total Bond | Vanguard Developed vs. Vanguard Mid Cap Index |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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