Correlation Between Virtus Convertible and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Virtus Convertible and Smallcap World 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 Virtus Convertible and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virtus Convertible and Smallcap World Fund, you can compare the effects of market volatilities on Virtus Convertible and Smallcap World 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 Virtus Convertible with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Convertible and Smallcap World.
Diversification Opportunities for Virtus Convertible and Smallcap World
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Virtus and Smallcap is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Convertible and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Virtus Convertible 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 Virtus Convertible are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Virtus Convertible i.e., Virtus Convertible and Smallcap World go up and down completely randomly.
Pair Corralation between Virtus Convertible and Smallcap World
Assuming the 90 days horizon Virtus Convertible is expected to generate 1.01 times less return on investment than Smallcap World. But when comparing it to its historical volatility, Virtus Convertible is 1.57 times less risky than Smallcap World. It trades about 0.08 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,903 in Smallcap World Fund on September 2, 2024 and sell it today you would earn a total of 1,496 from holding Smallcap World Fund or generate 25.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virtus Convertible vs. Smallcap World Fund
Performance |
| Timeline |
| Virtus Convertible |
| Smallcap World |
Virtus Convertible and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virtus Convertible and Smallcap World
The main advantage of trading using opposite Virtus Convertible and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Convertible position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| Virtus Convertible vs. Virtus Multi Strategy Target | Virtus Convertible vs. Virtus Multi Sector Short | Virtus Convertible vs. Ridgeworth Seix High | Virtus Convertible vs. Ridgeworth Innovative Growth |
| Smallcap World vs. Income Fund Of | Smallcap World vs. New World Fund | Smallcap World vs. American Mutual Fund | Smallcap World vs. American Mutual Fund |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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