Correlation Between Calvert Global and First Trust

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

By analyzing existing cross correlation between Calvert Global Energy and First Trust Merger, you can compare the effects of market volatilities on Calvert Global and First Trust 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 Global with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Global and First Trust.

Diversification Opportunities for Calvert Global and First Trust

0.2

Correlation Coefficient

Calvert Global  First Trust

Modest diversification

The 3 months correlation between Calvert and First is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Global Energy and First Trust Merger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Merger and Calvert Global 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 Global Energy are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Merger has no effect on the direction of Calvert Global i.e., Calvert Global and First Trust go up and down completely randomly.

Pair Corralation between Calvert Global and First Trust

Assuming the 90 days horizon Calvert Global Energy is expected to generate 0.5 times more return on investment than First Trust. However, Calvert Global Energy is 1.99 times less risky than First Trust. It trades about 0.06 of its potential returns per unit of risk. First Trust Merger is currently generating about -0.21 per unit of risk. If you would invest  1,086  in Calvert Global Energy on September 14, 2024 and sell it today you would earn a total of  8.00  from holding Calvert Global Energy or generate 0.74% return on investment over 90 days.

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

Calvert Global Energy  vs.  First Trust Merger

Calvert Global Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Trust Merger

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Calvert Global and First Trust

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

The idea behind Calvert Global Energy and First Trust Merger 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.