Correlation Between National Tax and Calvert Income

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

Diversification Opportunities for National Tax and Calvert Income

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between National and Calvert is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Calvert Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Income and National Tax 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 The National Tax Free are associated (or correlated) with Calvert Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Income has no effect on the direction of National Tax i.e., National Tax and Calvert Income go up and down completely randomly.

Pair Corralation between National Tax and Calvert Income

Assuming the 90 days horizon National Tax is expected to generate 1.86 times less return on investment than Calvert Income. But when comparing it to its historical volatility, The National Tax Free is 1.92 times less risky than Calvert Income. It trades about 0.07 of its potential returns per unit of risk. Calvert Income Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,343  in Calvert Income Fund on September 13, 2024 and sell it today you would earn a total of  170.00  from holding Calvert Income Fund or generate 12.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.8%
ValuesDaily Returns

The National Tax Free  vs.  Calvert Income Fund

 Performance 
       Timeline  
National Tax 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The National Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, National Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Calvert Income 

Risk-Adjusted Performance

0 of 100

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

National Tax and Calvert Income Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with National Tax and Calvert Income

The main advantage of trading using opposite National Tax and Calvert Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Tax position performs unexpectedly, Calvert Income 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 Income will offset losses from the drop in Calvert Income's long position.
The idea behind The National Tax Free and Calvert Income 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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