Correlation Between Gmo Alternative and Virtus Kar

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

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

Diversification Opportunities for Gmo Alternative and Virtus Kar

-0.31

Correlation Coefficient

Gmo Alternative  Virtus Kar

Very good diversification

The 3 months correlation between Gmo and Virtus is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gmo Alternative Allocation 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 Gmo Alternative 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 Gmo Alternative Allocation 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 Gmo Alternative i.e., Gmo Alternative and Virtus Kar go up and down completely randomly.

Pair Corralation between Gmo Alternative and Virtus Kar

Assuming the 90 days horizon Gmo Alternative Allocation is expected to generate 0.42 times more return on investment than Virtus Kar. However, Gmo Alternative Allocation is 2.37 times less risky than Virtus Kar. It trades about 0.0 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about -0.1 per unit of risk. If you would invest  1,723  in Gmo Alternative Allocation on November 19, 2024 and sell it today you would earn a total of  1.00  from holding Gmo Alternative Allocation or generate 0.06% return on investment over 90 days.

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

Gmo Alternative Allocation  vs.  Virtus Kar Small Cap

Gmo Alternative Allo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gmo Alternative Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Gmo Alternative 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 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.

Pair Trading with Gmo Alternative and Virtus Kar

The main advantage of trading using opposite Gmo Alternative and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Alternative 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 Gmo Alternative Allocation 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.