Correlation Between Ab Global and Virtus Real

Can any of the company-specific risk be diversified away by investing in both Ab Global and Virtus Real 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 Ab Global and Virtus Real into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Global Real and Virtus Real Estate, you can compare the effects of market volatilities on Ab Global and Virtus Real 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 Ab Global with a short position of Virtus Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and Virtus Real.

Diversification Opportunities for Ab Global and Virtus Real

0.75

Correlation Coefficient

Ab Global  Virtus Real

Poor diversification

The 3 months correlation between ARECX and Virtus is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Real and Virtus Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Real Estate and Ab Global 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 Ab Global Real are associated (or correlated) with Virtus Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Real Estate has no effect on the direction of Ab Global i.e., Ab Global and Virtus Real go up and down completely randomly.

Pair Corralation between Ab Global and Virtus Real

Assuming the 90 days horizon Ab Global is expected to generate 1.39 times less return on investment than Virtus Real. But when comparing it to its historical volatility, Ab Global Real is 1.21 times less risky than Virtus Real. It trades about 0.02 of its potential returns per unit of risk. Virtus Real Estate is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,674  in Virtus Real Estate on September 25, 2024 and sell it today you would earn a total of  211.00  from holding Virtus Real Estate or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ab Global Real  vs.  Virtus Real Estate

Ab Global Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ab Global Real has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Virtus Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Ab Global and Virtus Real

The main advantage of trading using opposite Ab Global and Virtus Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global position performs unexpectedly, Virtus Real 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 Real will offset losses from the drop in Virtus Real's long position.

The idea behind Ab Global Real and Virtus Real Estate 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.