Correlation Between Eaton Vance and Vanguard Short

Can any of the company-specific risk be diversified away by investing in both Eaton Vance and Vanguard Short 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 Eaton Vance and Vanguard Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eaton Vance Short and Vanguard Short Term Federal, you can compare the effects of market volatilities on Eaton Vance and Vanguard Short 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 Eaton Vance with a short position of Vanguard Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Vanguard Short.

Diversification Opportunities for Eaton Vance and Vanguard Short

0.97

Correlation Coefficient

Eaton Vance  Vanguard Short

Almost no diversification

The 3 months correlation between Eaton and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Short and Vanguard Short Term Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Eaton Vance 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 Eaton Vance Short are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Eaton Vance i.e., Eaton Vance and Vanguard Short go up and down completely randomly.

Pair Corralation between Eaton Vance and Vanguard Short

Assuming the 90 days horizon Eaton Vance Short is expected to under-perform the Vanguard Short. In addition to that, Eaton Vance is 1.34 times more volatile than Vanguard Short Term Federal. It trades about -0.08 of its total potential returns per unit of risk. Vanguard Short Term Federal is currently generating about -0.06 per unit of volatility. If you would invest  1,023  in Vanguard Short Term Federal on September 12, 2024 and sell it today you would lose (5.00) from holding Vanguard Short Term Federal or give up 0.49% of portfolio value over 90 days.

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

Eaton Vance Short  vs.  Vanguard Short Term Federal

Eaton Vance Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eaton Vance and Vanguard Short

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

The idea behind Eaton Vance Short and Vanguard Short Term Federal 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.