Correlation Between Eaton Vance and Vanguard Total

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

By analyzing existing cross correlation between Eaton Vance Tax Managed and Vanguard Total Stock, you can compare the effects of market volatilities on Eaton Vance and Vanguard Total 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 Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Vanguard Total.

Diversification Opportunities for Eaton Vance and Vanguard Total

1.0

Correlation Coefficient

Eaton Vance  Vanguard Total

No risk reduction

The 3 months correlation between Eaton and Vanguard is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Tax Managed and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Tax Managed are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Eaton Vance i.e., Eaton Vance and Vanguard Total go up and down completely randomly.

Pair Corralation between Eaton Vance and Vanguard Total

Assuming the 90 days horizon Eaton Vance is expected to generate 1.2 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Eaton Vance Tax Managed is 1.04 times less risky than Vanguard Total. It trades about 0.18 of its potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  13,216  in Vanguard Total Stock on September 3, 2024 and sell it today you would earn a total of  1,373  from holding Vanguard Total Stock or generate 10.39% return on investment over 90 days.

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

Eaton Vance Tax Managed  vs.  Vanguard Total Stock

Eaton Vance Tax

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Tax Managed are ranked lower than 14 (%) 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.

Vanguard Total Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Total may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eaton Vance and Vanguard Total

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

The idea behind Eaton Vance Tax Managed and Vanguard Total Stock 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.