Correlation Between Federated Short-term and Calvert Short

Can any of the company-specific risk be diversified away by investing in both Federated Short-term and Calvert Short 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 Federated Short-term and Calvert Short into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federated Short Term Income and Calvert Short Duration, you can compare the effects of market volatilities on Federated Short-term and Calvert Short 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 Federated Short-term with a short position of Calvert Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Calvert Short.

Diversification Opportunities for Federated Short-term and Calvert Short

0.89

Correlation Coefficient

Federated Short-term  Calvert Short

Very poor diversification

The 3 months correlation between FEDERATED and Calvert is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Calvert Short Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Short Duration and Federated Short-term 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 Federated Short Term Income are associated (or correlated) with Calvert Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Short Duration has no effect on the direction of Federated Short-term i.e., Federated Short-term and Calvert Short go up and down completely randomly.

Pair Corralation between Federated Short-term and Calvert Short

Assuming the 90 days horizon Federated Short Term Income is expected to generate 1.09 times more return on investment than Calvert Short. However, Federated Short-term is 1.09 times more volatile than Calvert Short Duration. It trades about 0.04 of its potential returns per unit of risk. Calvert Short Duration is currently generating about 0.03 per unit of risk. If you would invest  847.00  in Federated Short Term Income on September 3, 2024 and sell it today you would earn a total of  3.00  from holding Federated Short Term Income or generate 0.35% return on investment over 90 days.

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

Federated Short Term Income  vs.  Calvert Short Duration

Federated Short Term

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Short Term Income are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Short-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Calvert Short Duration

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Calvert Short Duration are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Calvert Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Federated Short-term and Calvert Short

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

The idea behind Federated Short Term Income and Calvert Short Duration 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.