Correlation Between Global Stock and Virtus Kar

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

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

Diversification Opportunities for Global Stock and Virtus Kar

0.5

Correlation Coefficient

Global Stock  Virtus Kar

Very weak diversification

The 3 months correlation between Global and Virtus is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Global Stock Fund 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 Global Stock 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 Global Stock Fund 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 Global Stock i.e., Global Stock and Virtus Kar go up and down completely randomly.

Pair Corralation between Global Stock and Virtus Kar

Assuming the 90 days horizon Global Stock Fund is expected to under-perform the Virtus Kar. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Stock Fund is 1.03 times less risky than Virtus Kar. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Virtus Kar Small Cap is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,464  in Virtus Kar Small Cap on September 26, 2024 and sell it today you would lose (178.00) from holding Virtus Kar Small Cap or give up 3.26% of portfolio value over 90 days.

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

Global Stock Fund  vs.  Virtus Kar Small Cap

Global Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus Kar Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Stock and Virtus Kar

The main advantage of trading using opposite Global Stock and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Stock 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 Global Stock Fund 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.