Correlation Between Pax Balanced and Calvert Equity

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

By analyzing existing cross correlation between Pax Balanced Fund and Calvert Equity Portfolio, you can compare the effects of market volatilities on Pax Balanced and Calvert Equity 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 Pax Balanced with a short position of Calvert Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pax Balanced and Calvert Equity.

Diversification Opportunities for Pax Balanced and Calvert Equity

0.86

Correlation Coefficient

Pax Balanced  Calvert Equity

Very poor diversification

The 3 months correlation between Pax and Calvert is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pax Balanced Fund and Calvert Equity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Equity Portfolio and Pax Balanced 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 Pax Balanced Fund are associated (or correlated) with Calvert Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Equity Portfolio has no effect on the direction of Pax Balanced i.e., Pax Balanced and Calvert Equity go up and down completely randomly.

Pair Corralation between Pax Balanced and Calvert Equity

Assuming the 90 days horizon Pax Balanced is expected to generate 1.58 times less return on investment than Calvert Equity. But when comparing it to its historical volatility, Pax Balanced Fund is 1.29 times less risky than Calvert Equity. It trades about 0.04 of its potential returns per unit of risk. Calvert Equity Portfolio is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,511  in Calvert Equity Portfolio on September 13, 2024 and sell it today you would earn a total of  130.00  from holding Calvert Equity Portfolio or generate 1.53% return on investment over 90 days.

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

Pax Balanced Fund  vs.  Calvert Equity Portfolio

Pax Balanced

Risk-Adjusted Performance

2 of 100

Weak

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

Calvert Equity Portfolio

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Pax Balanced and Calvert Equity

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

The idea behind Pax Balanced Fund and Calvert Equity Portfolio 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.