Correlation Between Calvert Conservative and Government Securities
Can any of the company-specific risk be diversified away by investing in both Calvert Conservative and Government Securities 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 Conservative and Government Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Calvert Conservative Allocation and Government Securities Fund, you can compare the effects of market volatilities on Calvert Conservative and Government Securities 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 Conservative with a short position of Government Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Conservative and Government Securities.
Diversification Opportunities for Calvert Conservative and Government Securities
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Calvert and Government is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Conservative Allocatio and Government Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Securities and Calvert Conservative 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 Conservative Allocation are associated (or correlated) with Government Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Securities has no effect on the direction of Calvert Conservative i.e., Calvert Conservative and Government Securities go up and down completely randomly.
Pair Corralation between Calvert Conservative and Government Securities
Assuming the 90 days horizon Calvert Conservative Allocation is expected to generate 1.18 times more return on investment than Government Securities. However, Calvert Conservative is 1.18 times more volatile than Government Securities Fund. It trades about 0.28 of its potential returns per unit of risk. Government Securities Fund is currently generating about 0.2 per unit of risk. If you would invest 1,816 in Calvert Conservative Allocation on September 13, 2024 and sell it today you would earn a total of 27.00 from holding Calvert Conservative Allocation or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Calvert Conservative Allocatio vs. Government Securities Fund
Performance |
| Timeline |
| Calvert Conservative |
| Government Securities |
Calvert Conservative and Government Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Calvert Conservative and Government Securities
The main advantage of trading using opposite Calvert Conservative and Government Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Conservative position performs unexpectedly, Government Securities 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 Government Securities will offset losses from the drop in Government Securities' long position.The idea behind Calvert Conservative Allocation and Government Securities Fund 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.
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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