Correlation Between Vanguard Total and Calvert Long-term

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

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

Diversification Opportunities for Vanguard Total and Calvert Long-term

1.0

Correlation Coefficient

Vanguard Total  Calvert Long-term

No risk reduction

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

Pair Corralation between Vanguard Total and Calvert Long-term

Assuming the 90 days horizon Vanguard Total Bond is expected to under-perform the Calvert Long-term. In addition to that, Vanguard Total is 1.08 times more volatile than Calvert Long Term Income. It trades about -0.04 of its total potential returns per unit of risk. Calvert Long Term Income is currently generating about -0.04 per unit of volatility. If you would invest  1,596  in Calvert Long Term Income on September 3, 2024 and sell it today you would lose (13.00) from holding Calvert Long Term Income or give up 0.81% of portfolio value over 90 days.

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

Vanguard Total Bond  vs.  Calvert Long Term Income

Vanguard Total Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Calvert Long Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard Total and Calvert Long-term

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

The idea behind Vanguard Total Bond and Calvert Long Term Income 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.