Correlation Between Virtus Multi-strategy and Virtus Kar
Can any of the company-specific risk be diversified away by investing in both Virtus Multi-strategy and Virtus Kar 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 Multi-strategy and Virtus Kar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virtus Multi Strategy Target and Virtus Kar Small Cap, you can compare the effects of market volatilities on Virtus Multi-strategy and Virtus Kar 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 Multi-strategy with a short position of Virtus Kar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Multi-strategy and Virtus Kar.
Diversification Opportunities for Virtus Multi-strategy and Virtus Kar
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Virtus and Virtus is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Multi Strategy Target and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small and Virtus Multi-strategy 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 Multi Strategy Target are associated (or correlated) with Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Virtus Multi-strategy i.e., Virtus Multi-strategy and Virtus Kar go up and down completely randomly.
Pair Corralation between Virtus Multi-strategy and Virtus Kar
Assuming the 90 days horizon Virtus Multi-strategy is expected to generate 1.27 times less return on investment than Virtus Kar. But when comparing it to its historical volatility, Virtus Multi Strategy Target is 5.97 times less risky than Virtus Kar. It trades about 0.16 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,429 in Virtus Kar Small Cap on November 5, 2024 and sell it today you would earn a total of 202.00 from holding Virtus Kar Small Cap or generate 8.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.59% |
| Values | Daily Returns |
Virtus Multi Strategy Target vs. Virtus Kar Small Cap
Performance |
| Timeline |
| Virtus Multi Strategy |
| Virtus Kar Small |
Virtus Multi-strategy and Virtus Kar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virtus Multi-strategy and Virtus Kar
The main advantage of trading using opposite Virtus Multi-strategy and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Multi-strategy position performs unexpectedly, Virtus Kar 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 Kar will offset losses from the drop in Virtus Kar's long position.The idea behind Virtus Multi Strategy Target and Virtus Kar Small Cap 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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