Correlation Between Federated Short-term and Virtus Multi
Can any of the company-specific risk be diversified away by investing in both Federated Short-term and Virtus Multi 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 Federated Short-term and Virtus Multi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Short Term Income and Virtus Multi Strategy Target, you can compare the effects of market volatilities on Federated Short-term and Virtus Multi 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 Federated Short-term with a short position of Virtus Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Short-term and Virtus Multi.
Diversification Opportunities for Federated Short-term and Virtus Multi
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FEDERATED and Virtus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Federated Short Term Income and Virtus Multi Strategy Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Multi Strategy and Federated Short-term 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 Federated Short Term Income are associated (or correlated) with Virtus Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Multi Strategy has no effect on the direction of Federated Short-term i.e., Federated Short-term and Virtus Multi go up and down completely randomly.
Pair Corralation between Federated Short-term and Virtus Multi
Assuming the 90 days horizon Federated Short-term is expected to generate 1.46 times less return on investment than Virtus Multi. But when comparing it to its historical volatility, Federated Short Term Income is 1.74 times less risky than Virtus Multi. It trades about 0.13 of its potential returns per unit of risk. Virtus Multi Strategy Target is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,573 in Virtus Multi Strategy Target on September 3, 2024 and sell it today you would earn a total of 248.00 from holding Virtus Multi Strategy Target or generate 15.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Federated Short Term Income vs. Virtus Multi Strategy Target
Performance |
| Timeline |
| Federated Short Term |
| Virtus Multi Strategy |
Federated Short-term and Virtus Multi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Short-term and Virtus Multi
The main advantage of trading using opposite Federated Short-term and Virtus Multi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Short-term position performs unexpectedly, Virtus Multi 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 Virtus Multi will offset losses from the drop in Virtus Multi's long position.The idea behind Federated Short Term Income and Virtus Multi Strategy Target 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.
| Virtus Multi vs. Federated Short Term Income | Virtus Multi vs. Siit Ultra Short | Virtus Multi vs. Aqr Long Short Equity | Virtus Multi vs. Vanguard Institutional Short Term |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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