Correlation Between Calvert Equity and Pax Balanced

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

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

Diversification Opportunities for Calvert Equity and Pax Balanced

0.87

Correlation Coefficient

Calvert Equity  Pax Balanced

Very poor diversification

The 3 months correlation between Calvert and Pax is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Equity Portfolio and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced and Calvert Equity 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 Equity Portfolio are associated (or correlated) with Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Calvert Equity i.e., Calvert Equity and Pax Balanced go up and down completely randomly.

Pair Corralation between Calvert Equity and Pax Balanced

Assuming the 90 days horizon Calvert Equity Portfolio is expected to generate 1.3 times more return on investment than Pax Balanced. However, Calvert Equity is 1.3 times more volatile than Pax Balanced Fund. It trades about 0.08 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.09 per unit of risk. If you would invest  8,374  in Calvert Equity Portfolio on September 5, 2024 and sell it today you would earn a total of  254.00  from holding Calvert Equity Portfolio or generate 3.03% return on investment over 90 days.

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

Calvert Equity Portfolio  vs.  Pax Balanced Fund

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.

Pax Balanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pax Balanced Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Pax Balanced 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 Equity and Pax Balanced

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

The idea behind Calvert Equity Portfolio and Pax Balanced 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.