Correlation Between Calvert Short and Calvert Developed
Can any of the company-specific risk be diversified away by investing in both Calvert Short and Calvert 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 Short and Calvert Developed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Calvert Short Duration and Calvert Developed Market, you can compare the effects of market volatilities on Calvert Short and Calvert 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 Short with a short position of Calvert Developed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Short and Calvert Developed.
Diversification Opportunities for Calvert Short and Calvert Developed
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Calvert and Calvert is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Short Duration and Calvert Developed Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Developed Market and Calvert Short 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 Short Duration are associated (or correlated) with Calvert Developed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Developed Market has no effect on the direction of Calvert Short i.e., Calvert Short and Calvert Developed go up and down completely randomly.
Pair Corralation between Calvert Short and Calvert Developed
Assuming the 90 days horizon Calvert Short Duration is expected to generate 0.09 times more return on investment than Calvert Developed. However, Calvert Short Duration is 11.76 times less risky than Calvert Developed. It trades about -0.1 of its potential returns per unit of risk. Calvert Developed Market is currently generating about -0.01 per unit of risk. If you would invest 1,585 in Calvert Short Duration on January 1, 2025 and sell it today you would lose (3.00) from holding Calvert Short Duration or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Calvert Short Duration vs. Calvert Developed Market
Performance |
| Timeline |
| Calvert Short Duration |
| Calvert Developed Market |
Calvert Short and Calvert Developed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Calvert Short and Calvert Developed
The main advantage of trading using opposite Calvert Short and Calvert Developed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Short position performs unexpectedly, Calvert 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 Calvert Developed will offset losses from the drop in Calvert Developed's long position.| Calvert Short vs. Calvert Developed Market | ||
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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