Correlation Between Eaton Vance and Parametric Volatility

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

By analyzing existing cross correlation between Eaton Vance Municipal and Parametric Volatility Risk, you can compare the effects of market volatilities on Eaton Vance and Parametric Volatility 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 Parametric Volatility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eaton Vance and Parametric Volatility.

Diversification Opportunities for Eaton Vance and Parametric Volatility

0.03

Correlation Coefficient

Eaton Vance  Parametric Volatility

Significant diversification

The 3 months correlation between Eaton and Parametric is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Municipal and Parametric Volatility Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric Volatility 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 Municipal are associated (or correlated) with Parametric Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric Volatility has no effect on the direction of Eaton Vance i.e., Eaton Vance and Parametric Volatility go up and down completely randomly.

Pair Corralation between Eaton Vance and Parametric Volatility

Assuming the 90 days horizon Eaton Vance Municipal is expected to generate 0.34 times more return on investment than Parametric Volatility. However, Eaton Vance Municipal is 2.93 times less risky than Parametric Volatility. It trades about 0.09 of its potential returns per unit of risk. Parametric Volatility Risk is currently generating about -0.03 per unit of risk. If you would invest  1,117  in Eaton Vance Municipal on February 5, 2024 and sell it today you would earn a total of  4.00  from holding Eaton Vance Municipal or generate 0.36% return on investment over 90 days.

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

Eaton Vance Municipal  vs.  Parametric Volatility Risk

Eaton Vance Municipal

Risk-Adjusted Performance

2 of 100

Weak

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

Parametric Volatility

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Parametric Volatility Risk are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Parametric Volatility is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eaton Vance and Parametric Volatility

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

The idea behind Eaton Vance Municipal and Parametric Volatility Risk 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.