Correlation Between National Tax and Virtus Select

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

By analyzing existing cross correlation between The National Tax Free and Virtus Select Mlp, you can compare the effects of market volatilities on National Tax and Virtus Select 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 National Tax with a short position of Virtus Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Tax and Virtus Select.

Diversification Opportunities for National Tax and Virtus Select

-0.08

Correlation Coefficient

National Tax  Virtus Select

Good diversification

The 3 months correlation between National and Virtus is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding The National Tax Free and Virtus Select Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Select Mlp and National Tax 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 The National Tax Free are associated (or correlated) with Virtus Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Select Mlp has no effect on the direction of National Tax i.e., National Tax and Virtus Select go up and down completely randomly.

Pair Corralation between National Tax and Virtus Select

Assuming the 90 days horizon National Tax is expected to generate 104.95 times less return on investment than Virtus Select. But when comparing it to its historical volatility, The National Tax Free is 4.47 times less risky than Virtus Select. It trades about 0.01 of its potential returns per unit of risk. Virtus Select Mlp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,480  in Virtus Select Mlp on September 13, 2024 and sell it today you would earn a total of  197.00  from holding Virtus Select Mlp or generate 13.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

The National Tax Free  vs.  Virtus Select Mlp

National Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The National Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, National Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Select Mlp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Select Mlp are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Virtus Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Tax and Virtus Select

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

The idea behind The National Tax Free and Virtus Select Mlp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.