Correlation Between Western Asset and Virtus Global

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

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

Diversification Opportunities for Western Asset and Virtus Global

0.88

Correlation Coefficient

Western Asset  Virtus Global

Very poor diversification

The 3 months correlation between Western and Virtus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Virtus Global Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Global Multi and Western Asset 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 Western Asset Mortgage are associated (or correlated) with Virtus Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Global Multi has no effect on the direction of Western Asset i.e., Western Asset and Virtus Global go up and down completely randomly.

Pair Corralation between Western Asset and Virtus Global

Considering the 90-day investment horizon Western Asset is expected to generate 1.71 times less return on investment than Virtus Global. In addition to that, Western Asset is 1.12 times more volatile than Virtus Global Multi. It trades about 0.1 of its total potential returns per unit of risk. Virtus Global Multi is currently generating about 0.19 per unit of volatility. If you would invest  736.00  in Virtus Global Multi on December 28, 2024 and sell it today you would earn a total of  37.00  from holding Virtus Global Multi or generate 5.03% return on investment over 90 days.

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

Western Asset Mortgage  vs.  Virtus Global Multi

Western Asset Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Western Asset is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Virtus Global Multi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Global Multi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Virtus Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Asset and Virtus Global

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

The idea behind Western Asset Mortgage and Virtus Global Multi 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.