Correlation Between Fulcrum Diversified and Virtus Kar

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

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

Diversification Opportunities for Fulcrum Diversified and Virtus Kar

0.62

Correlation Coefficient

Fulcrum Diversified  Virtus Kar

Poor diversification

The 3 months correlation between Fulcrum and Virtus is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute 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 Fulcrum Diversified 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 Fulcrum Diversified Absolute 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 Fulcrum Diversified i.e., Fulcrum Diversified and Virtus Kar go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Virtus Kar

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to generate 0.39 times more return on investment than Virtus Kar. However, Fulcrum Diversified Absolute is 2.59 times less risky than Virtus Kar. It trades about -0.03 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about -0.07 per unit of risk. If you would invest  932.00  in Fulcrum Diversified Absolute on December 21, 2024 and sell it today you would lose (6.00) from holding Fulcrum Diversified Absolute or give up 0.64% of portfolio value over 90 days.

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

Fulcrum Diversified Absolute  vs.  Virtus Kar Small Cap

Fulcrum Diversified

Risk-Adjusted Performance

Very Weak

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

Virtus Kar Small

Risk-Adjusted Performance

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 Fulcrum Diversified and Virtus Kar

The main advantage of trading using opposite Fulcrum Diversified and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fulcrum Diversified 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 Fulcrum Diversified Absolute 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.