Correlation Between Eaton Vance and Invesco California

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

By analyzing existing cross correlation between Eaton Vance National and Invesco California Value, you can compare the effects of market volatilities on Eaton Vance and Invesco California 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 Invesco California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Invesco California.

Diversification Opportunities for Eaton Vance and Invesco California

0.7

Correlation Coefficient

Eaton Vance  Invesco California

Poor diversification

The 3 months correlation between Eaton and Invesco is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance National and Invesco California Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco California Value 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 National are associated (or correlated) with Invesco California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco California Value has no effect on the direction of Eaton Vance i.e., Eaton Vance and Invesco California go up and down completely randomly.

Pair Corralation between Eaton Vance and Invesco California

Considering the 90-day investment horizon Eaton Vance National is expected to generate 0.65 times more return on investment than Invesco California. However, Eaton Vance National is 1.54 times less risky than Invesco California. It trades about -0.07 of its potential returns per unit of risk. Invesco California Value is currently generating about -0.08 per unit of risk. If you would invest  1,783  in Eaton Vance National on September 12, 2024 and sell it today you would lose (38.00) from holding Eaton Vance National or give up 2.13% of portfolio value over 90 days.

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

Eaton Vance National  vs.  Invesco California Value

Eaton Vance National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eaton Vance National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eaton Vance is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco California Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco California Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Invesco California is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eaton Vance and Invesco California

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

The idea behind Eaton Vance National and Invesco California Value 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.