Correlation Between Calvert Developed and New World

Can any of the company-specific risk be diversified away by investing in both Calvert Developed and New World 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 New World 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 New World Fund, you can compare the effects of market volatilities on Calvert Developed and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Developed and New World.

Diversification Opportunities for Calvert Developed and New World

0.77

Correlation Coefficient

Calvert Developed  New World

Poor diversification

The 3 months correlation between Calvert and New is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Developed Market and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund 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 New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Calvert Developed i.e., Calvert Developed and New World go up and down completely randomly.

Pair Corralation between Calvert Developed and New World

Assuming the 90 days horizon Calvert Developed Market is expected to under-perform the New World. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert Developed Market is 1.01 times less risky than New World. The mutual fund trades about -0.17 of its potential returns per unit of risk. The New World Fund is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  8,345  in New World Fund on September 22, 2024 and sell it today you would lose (585.00) from holding New World Fund or give up 7.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Calvert Developed Market  vs.  New World Fund

Calvert Developed Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calvert Developed Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

New World Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New World Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Calvert Developed and New World

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

The idea behind Calvert Developed Market and New World 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.