Correlation Between VictoryShares and VictoryShares 500

Can any of the company-specific risk be diversified away by investing in both VictoryShares and VictoryShares 500 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 VictoryShares and VictoryShares 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VictoryShares EQ Income and VictoryShares 500 Enhanced, you can compare the effects of market volatilities on VictoryShares and VictoryShares 500 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 VictoryShares with a short position of VictoryShares 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of VictoryShares and VictoryShares 500.

Diversification Opportunities for VictoryShares and VictoryShares 500

0.85

Correlation Coefficient

VictoryShares  VictoryShares 500

Very poor diversification

The 3 months correlation between VictoryShares and VictoryShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares EQ Income and VictoryShares 500 Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares 500 and VictoryShares 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 VictoryShares EQ Income are associated (or correlated) with VictoryShares 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares 500 has no effect on the direction of VictoryShares i.e., VictoryShares and VictoryShares 500 go up and down completely randomly.

Pair Corralation between VictoryShares and VictoryShares 500

Considering the 90-day investment horizon VictoryShares EQ Income is expected to generate 0.8 times more return on investment than VictoryShares 500. However, VictoryShares EQ Income is 1.25 times less risky than VictoryShares 500. It trades about 0.27 of its potential returns per unit of risk. VictoryShares 500 Enhanced is currently generating about -0.11 per unit of risk. If you would invest  6,450  in VictoryShares EQ Income on December 1, 2024 and sell it today you would earn a total of  182.00  from holding VictoryShares EQ Income or generate 2.82% return on investment over 90 days.

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

VictoryShares EQ Income  vs.  VictoryShares 500 Enhanced

VictoryShares EQ Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares EQ Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, VictoryShares is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

VictoryShares 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares 500 Enhanced has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, VictoryShares 500 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with VictoryShares and VictoryShares 500

The main advantage of trading using opposite VictoryShares and VictoryShares 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares position performs unexpectedly, VictoryShares 500 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 VictoryShares 500 will offset losses from the drop in VictoryShares 500's long position.

The idea behind VictoryShares EQ Income and VictoryShares 500 Enhanced 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.