Correlation Between International Advantage and Virtus Emerging
Can any of the company-specific risk be diversified away by investing in both International Advantage and Virtus Emerging 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 International Advantage and Virtus Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Advantage Portfolio and Virtus Emerging Markets, you can compare the effects of market volatilities on International Advantage and Virtus Emerging 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 International Advantage with a short position of Virtus Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Advantage and Virtus Emerging.
Diversification Opportunities for International Advantage and Virtus Emerging
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between International and Virtus is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding International Advantage Portfo and Virtus Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Emerging Markets and International Advantage 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 International Advantage Portfolio are associated (or correlated) with Virtus Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Emerging Markets has no effect on the direction of International Advantage i.e., International Advantage and Virtus Emerging go up and down completely randomly.
Pair Corralation between International Advantage and Virtus Emerging
Assuming the 90 days horizon International Advantage is expected to generate 1.44 times less return on investment than Virtus Emerging. In addition to that, International Advantage is 1.65 times more volatile than Virtus Emerging Markets. It trades about 0.03 of its total potential returns per unit of risk. Virtus Emerging Markets is currently generating about 0.08 per unit of volatility. If you would invest 1,197 in Virtus Emerging Markets on September 3, 2024 and sell it today you would earn a total of 351.00 from holding Virtus Emerging Markets or generate 29.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Advantage Portfo vs. Virtus Emerging Markets
Performance |
| Timeline |
| International Advantage |
| Virtus Emerging Markets |
International Advantage and Virtus Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Advantage and Virtus Emerging
The main advantage of trading using opposite International Advantage and Virtus Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Advantage position performs unexpectedly, Virtus Emerging 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 Emerging will offset losses from the drop in Virtus Emerging's long position.The idea behind International Advantage Portfolio and Virtus Emerging Markets 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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