Correlation Between Balanced Allocation and Calvert Moderate

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

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

Diversification Opportunities for Balanced Allocation and Calvert Moderate

0.91

Correlation Coefficient

Balanced Allocation  Calvert Moderate

Almost no diversification

The 3 months correlation between Balanced and Calvert is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Allocation Fund and Calvert Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert Moderate All and Balanced Allocation 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 Balanced Allocation Fund are associated (or correlated) with Calvert Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert Moderate All has no effect on the direction of Balanced Allocation i.e., Balanced Allocation and Calvert Moderate go up and down completely randomly.

Pair Corralation between Balanced Allocation and Calvert Moderate

Assuming the 90 days horizon Balanced Allocation Fund is expected to generate 0.72 times more return on investment than Calvert Moderate. However, Balanced Allocation Fund is 1.39 times less risky than Calvert Moderate. It trades about -0.02 of its potential returns per unit of risk. Calvert Moderate Allocation is currently generating about -0.03 per unit of risk. If you would invest  1,182  in Balanced Allocation Fund on February 5, 2025 and sell it today you would lose (12.00) from holding Balanced Allocation Fund or give up 1.02% of portfolio value over 90 days.

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

Balanced Allocation Fund  vs.  Calvert Moderate Allocation

Balanced Allocation

Risk-Adjusted Performance

Very Weak

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

Calvert Moderate All

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Balanced Allocation and Calvert Moderate

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

The idea behind Balanced Allocation Fund and Calvert Moderate Allocation 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.