Correlation Between Calvert Small/mid-cap and Financial Industries

Can any of the company-specific risk be diversified away by investing in both Calvert Small/mid-cap and Financial Industries 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 Calvert Small/mid-cap and Financial Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Calvert Smallmid Cap A and Financial Industries Fund, you can compare the effects of market volatilities on Calvert Small/mid-cap and Financial Industries 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 Calvert Small/mid-cap with a short position of Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calvert Small/mid-cap and Financial Industries.

Diversification Opportunities for Calvert Small/mid-cap and Financial Industries

0.96

Correlation Coefficient

Calvert Small/mid-cap  Financial Industries

Almost no diversification

The 3 months correlation between Calvert and Financial is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Calvert Smallmid Cap A and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Calvert Small/mid-cap 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 Calvert Smallmid Cap A are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Calvert Small/mid-cap i.e., Calvert Small/mid-cap and Financial Industries go up and down completely randomly.

Pair Corralation between Calvert Small/mid-cap and Financial Industries

Assuming the 90 days horizon Calvert Smallmid Cap A is expected to under-perform the Financial Industries. But the mutual fund apears to be less risky and, when comparing its historical volatility, Calvert Smallmid Cap A is 1.14 times less risky than Financial Industries. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Financial Industries Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,925  in Financial Industries Fund on February 18, 2025 and sell it today you would lose (46.00) from holding Financial Industries Fund or give up 2.39% of portfolio value over 90 days.

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

Calvert Smallmid Cap A  vs.  Financial Industries Fund

Calvert Small/mid-cap

Risk-Adjusted Performance

Very Weak

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

Financial Industries

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Calvert Small/mid-cap and Financial Industries

The main advantage of trading using opposite Calvert Small/mid-cap and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calvert Small/mid-cap position performs unexpectedly, Financial Industries 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 Financial Industries will offset losses from the drop in Financial Industries' long position.

The idea behind Calvert Smallmid Cap A and Financial Industries Fund 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.