Correlation Between Ariel Appreciation and Calvert Equity

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

By analyzing existing cross correlation between Ariel Appreciation Fund and Calvert Equity Portfolio, you can compare the effects of market volatilities on Ariel Appreciation and Calvert Equity 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 Ariel Appreciation with a short position of Calvert Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel Appreciation and Calvert Equity.

Diversification Opportunities for Ariel Appreciation and Calvert Equity

0.5

Correlation Coefficient

Ariel Appreciation  Calvert Equity

Very weak diversification

The 3 months correlation between Ariel and Calvert is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ariel Appreciation Fund and Calvert Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Equity Portfolio and Ariel Appreciation 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 Ariel Appreciation Fund are associated (or correlated) with Calvert Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Equity Portfolio has no effect on the direction of Ariel Appreciation i.e., Ariel Appreciation and Calvert Equity go up and down completely randomly.

Pair Corralation between Ariel Appreciation and Calvert Equity

Assuming the 90 days horizon Ariel Appreciation Fund is expected to generate 1.75 times more return on investment than Calvert Equity. However, Ariel Appreciation is 1.75 times more volatile than Calvert Equity Portfolio. It trades about 0.16 of its potential returns per unit of risk. Calvert Equity Portfolio is currently generating about 0.08 per unit of risk. If you would invest  4,044  in Ariel Appreciation Fund on September 5, 2024 and sell it today you would earn a total of  435.00  from holding Ariel Appreciation Fund or generate 10.76% return on investment over 90 days.

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

Ariel Appreciation Fund  vs.  Calvert Equity Portfolio

Ariel Appreciation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ariel Appreciation Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ariel Appreciation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Calvert Equity Portfolio

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Equity Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Calvert Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ariel Appreciation and Calvert Equity

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

The idea behind Ariel Appreciation Fund and Calvert Equity Portfolio 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 Global Correlations module to find global opportunities by holding instruments from different markets.