Correlation Between Vanguard Short and Virtus Newfleet

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

By analyzing existing cross correlation between Vanguard Short Term Bond and Virtus Newfleet ABSMBS, you can compare the effects of market volatilities on Vanguard Short and Virtus Newfleet 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 Vanguard Short with a short position of Virtus Newfleet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Short and Virtus Newfleet.

Diversification Opportunities for Vanguard Short and Virtus Newfleet

0.28

Correlation Coefficient

Vanguard Short  Virtus Newfleet

Modest diversification

The 3 months correlation between Vanguard and Virtus is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Short Term Bond and Virtus Newfleet ABSMBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet ABSMBS and Vanguard Short 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 Vanguard Short Term Bond are associated (or correlated) with Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet ABSMBS has no effect on the direction of Vanguard Short i.e., Vanguard Short and Virtus Newfleet go up and down completely randomly.

Pair Corralation between Vanguard Short and Virtus Newfleet

Considering the 90-day investment horizon Vanguard Short is expected to generate 3.3 times less return on investment than Virtus Newfleet. In addition to that, Vanguard Short is 1.21 times more volatile than Virtus Newfleet ABSMBS. It trades about 0.06 of its total potential returns per unit of risk. Virtus Newfleet ABSMBS is currently generating about 0.24 per unit of volatility. If you would invest  2,394  in Virtus Newfleet ABSMBS on October 6, 2024 and sell it today you would earn a total of  24.00  from holding Virtus Newfleet ABSMBS or generate 1.0% return on investment over 90 days.

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

Vanguard Short Term Bond  vs.  Virtus Newfleet ABSMBS

Vanguard Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Short Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vanguard Short is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Short and Virtus Newfleet

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

The idea behind Vanguard Short Term Bond and Virtus Newfleet ABSMBS 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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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.