Correlation Between American States and Virtu Financial

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

By analyzing existing cross correlation between American States Water and Virtu Financial, you can compare the effects of market volatilities on American States and Virtu Financial 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 American States with a short position of Virtu Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Virtu Financial.

Diversification Opportunities for American States and Virtu Financial

-0.11

Correlation Coefficient

American States  Virtu Financial

Good diversification

The 3 months correlation between American and Virtu is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and Virtu Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtu Financial and American States 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 American States Water are associated (or correlated) with Virtu Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtu Financial has no effect on the direction of American States i.e., American States and Virtu Financial go up and down completely randomly.

Pair Corralation between American States and Virtu Financial

Assuming the 90 days trading horizon American States Water is expected to under-perform the Virtu Financial. But the stock apears to be less risky and, when comparing its historical volatility, American States Water is 1.23 times less risky than Virtu Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Virtu Financial is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,860  in Virtu Financial on October 25, 2024 and sell it today you would earn a total of  700.00  from holding Virtu Financial or generate 24.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

American States Water  vs.  Virtu Financial

American States Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American States Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Virtu Financial

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtu Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American States and Virtu Financial

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

The idea behind American States Water and Virtu Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.