Correlation Between Morningstar Municipal and Calvert High
Can any of the company-specific risk be diversified away by investing in both Morningstar Municipal and Calvert High 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 Morningstar Municipal and Calvert High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Municipal Bond and Calvert High Yield, you can compare the effects of market volatilities on Morningstar Municipal and Calvert High 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 Morningstar Municipal with a short position of Calvert High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Municipal and Calvert High.
Diversification Opportunities for Morningstar Municipal and Calvert High
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Morningstar and Calvert is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Municipal Bond and Calvert High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calvert High Yield and Morningstar Municipal 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 Morningstar Municipal Bond are associated (or correlated) with Calvert High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calvert High Yield has no effect on the direction of Morningstar Municipal i.e., Morningstar Municipal and Calvert High go up and down completely randomly.
Pair Corralation between Morningstar Municipal and Calvert High
Assuming the 90 days horizon Morningstar Municipal is expected to generate 2.16 times less return on investment than Calvert High. But when comparing it to its historical volatility, Morningstar Municipal Bond is 1.32 times less risky than Calvert High. It trades about 0.14 of its potential returns per unit of risk. Calvert High Yield is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,471 in Calvert High Yield on June 4, 2025 and sell it today you would earn a total of 50.00 from holding Calvert High Yield or generate 2.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Morningstar Municipal Bond vs. Calvert High Yield
Performance |
| Timeline |
| Morningstar Municipal |
| Calvert High Yield |
Morningstar Municipal and Calvert High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Morningstar Municipal and Calvert High
The main advantage of trading using opposite Morningstar Municipal and Calvert High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Municipal position performs unexpectedly, Calvert High 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 High will offset losses from the drop in Calvert High's long position.The idea behind Morningstar Municipal Bond and Calvert High Yield 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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