Correlation Between Federated Kaufmann and Virtus Kar

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

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

Diversification Opportunities for Federated Kaufmann and Virtus Kar

0.88

Correlation Coefficient

Federated Kaufmann  Virtus Kar

Very poor diversification

The 3 months correlation between Federated and Virtus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Federated Kaufmann Small and Virtus Kar Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Mid and Federated Kaufmann 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 Federated Kaufmann Small 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 Mid has no effect on the direction of Federated Kaufmann i.e., Federated Kaufmann and Virtus Kar go up and down completely randomly.

Pair Corralation between Federated Kaufmann and Virtus Kar

Assuming the 90 days horizon Federated Kaufmann is expected to generate 2.01 times less return on investment than Virtus Kar. In addition to that, Federated Kaufmann is 1.19 times more volatile than Virtus Kar Mid Cap. It trades about 0.04 of its total potential returns per unit of risk. Virtus Kar Mid Cap is currently generating about 0.1 per unit of volatility. If you would invest  5,855  in Virtus Kar Mid Cap on September 14, 2024 and sell it today you would earn a total of  808.00  from holding Virtus Kar Mid Cap or generate 13.8% return on investment over 90 days.

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

Federated Kaufmann Small  vs.  Virtus Kar Mid Cap

Federated Kaufmann Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Kaufmann Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Federated Kaufmann is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Kar Mid

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Virtus Kar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Federated Kaufmann and Virtus Kar

The main advantage of trading using opposite Federated Kaufmann and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Kaufmann 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 Federated Kaufmann Small and Virtus Kar Mid 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.