Correlation Between Parametric Intl and Eaton Vance

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

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

Diversification Opportunities for Parametric Intl and Eaton Vance

-0.71

Correlation Coefficient

Parametric Intl  Eaton Vance

Pay attention - limited upside

The 3 months correlation between Parametric and Eaton is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Parametric Intl Equity and Eaton Vance Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Small and Parametric Intl 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 Parametric Intl Equity are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Small has no effect on the direction of Parametric Intl i.e., Parametric Intl and Eaton Vance go up and down completely randomly.

Pair Corralation between Parametric Intl and Eaton Vance

Assuming the 90 days horizon Parametric Intl Equity is expected to under-perform the Eaton Vance. But the mutual fund apears to be less risky and, when comparing its historical volatility, Parametric Intl Equity is 1.49 times less risky than Eaton Vance. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Eaton Vance Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,434  in Eaton Vance Small Cap on September 2, 2024 and sell it today you would earn a total of  159.00  from holding Eaton Vance Small Cap or generate 11.09% return on investment over 90 days.

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

Parametric Intl Equity  vs.  Eaton Vance Small Cap

Parametric Intl Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eaton Vance Small

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Eaton Vance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Parametric Intl and Eaton Vance

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

The idea behind Parametric Intl Equity and Eaton Vance Small Cap 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.