Correlation Between Eaton Vance and Vanguard Small-cap

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

By analyzing existing cross correlation between Eaton Vance Richard and Vanguard Small Cap Value, you can compare the effects of market volatilities on Eaton Vance and Vanguard Small-cap 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 Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Vanguard Small-cap.

Diversification Opportunities for Eaton Vance and Vanguard Small-cap

0.87

Correlation Coefficient

Eaton Vance  Vanguard Small-cap

Very poor diversification

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

Pair Corralation between Eaton Vance and Vanguard Small-cap

Assuming the 90 days horizon Eaton Vance is expected to generate 2.4 times less return on investment than Vanguard Small-cap. But when comparing it to its historical volatility, Eaton Vance Richard is 1.92 times less risky than Vanguard Small-cap. It trades about 0.26 of its potential returns per unit of risk. Vanguard Small Cap Value is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  4,765  in Vanguard Small Cap Value on September 2, 2024 and sell it today you would earn a total of  413.00  from holding Vanguard Small Cap Value or generate 8.67% return on investment over 90 days.

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

Eaton Vance Richard  vs.  Vanguard Small Cap Value

Eaton Vance Richard

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Richard are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. 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 Small Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Value are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unfluctuating basic indicators, Vanguard Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eaton Vance and Vanguard Small-cap

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

The idea behind Eaton Vance Richard and Vanguard Small Cap 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.

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.