Correlation Between Intermediate Government and Eaton Vance

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

By analyzing existing cross correlation between Intermediate Government Bond and Eaton Vance Short, you can compare the effects of market volatilities on Intermediate Government and Eaton Vance 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 Intermediate Government with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Government and Eaton Vance.

Diversification Opportunities for Intermediate Government and Eaton Vance

0.78

Correlation Coefficient

Intermediate Government  Eaton Vance

Poor diversification

The 3 months correlation between Intermediate and Eaton is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Government Bond and Eaton Vance Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Short and Intermediate Government 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 Intermediate Government Bond are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Short has no effect on the direction of Intermediate Government i.e., Intermediate Government and Eaton Vance go up and down completely randomly.

Pair Corralation between Intermediate Government and Eaton Vance

Assuming the 90 days horizon Intermediate Government is expected to generate 2.35 times less return on investment than Eaton Vance. But when comparing it to its historical volatility, Intermediate Government Bond is 1.75 times less risky than Eaton Vance. It trades about 0.23 of its potential returns per unit of risk. Eaton Vance Short is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  714.00  in Eaton Vance Short on March 9, 2024 and sell it today you would earn a total of  9.00  from holding Eaton Vance Short or generate 1.26% return on investment over 90 days.

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

Intermediate Government Bond  vs.  Eaton Vance Short

Intermediate Government

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Government Bond are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Intermediate Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eaton Vance Short

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Short are ranked lower than 4 (%) 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.

Pair Trading with Intermediate Government and Eaton Vance

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

The idea behind Intermediate Government Bond and Eaton Vance Short 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.