Correlation Between American Funds and Eaton Vance

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

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

Diversification Opportunities for American Funds and Eaton Vance

0.89

Correlation Coefficient

American Funds  Eaton Vance

Very poor diversification

The 3 months correlation between American and Eaton is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Eaton Vance Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Large and American Funds 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 American Funds American 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 Large has no effect on the direction of American Funds i.e., American Funds and Eaton Vance go up and down completely randomly.

Pair Corralation between American Funds and Eaton Vance

Assuming the 90 days horizon American Funds is expected to generate 1.54 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, American Funds American is 1.26 times less risky than Eaton Vance. It trades about 0.15 of its potential returns per unit of risk. Eaton Vance Large Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,611  in Eaton Vance Large Cap on September 3, 2024 and sell it today you would earn a total of  213.00  from holding Eaton Vance Large Cap or generate 8.16% return on investment over 90 days.

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

American Funds American  vs.  Eaton Vance Large Cap

American Funds American

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds American are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance Large

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with American Funds and Eaton Vance

The main advantage of trading using opposite American Funds and Eaton Vance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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 American Funds American and Eaton Vance Large 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.