Correlation Between Global Bond and Virtus Multi-sector

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

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

Diversification Opportunities for Global Bond and Virtus Multi-sector

0.92

Correlation Coefficient

Global Bond  Virtus Multi-sector

Almost no diversification

The 3 months correlation between Global and Virtus is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Global Bond Fund and Virtus Multi Sector Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Multi Sector and Global Bond 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 Global Bond Fund are associated (or correlated) with Virtus Multi-sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Multi Sector has no effect on the direction of Global Bond i.e., Global Bond and Virtus Multi-sector go up and down completely randomly.

Pair Corralation between Global Bond and Virtus Multi-sector

Assuming the 90 days horizon Global Bond is expected to generate 1.15 times less return on investment than Virtus Multi-sector. In addition to that, Global Bond is 1.38 times more volatile than Virtus Multi Sector Short. It trades about 0.11 of its total potential returns per unit of risk. Virtus Multi Sector Short is currently generating about 0.18 per unit of volatility. If you would invest  448.00  in Virtus Multi Sector Short on December 28, 2024 and sell it today you would earn a total of  8.00  from holding Virtus Multi Sector Short or generate 1.79% return on investment over 90 days.

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

Global Bond Fund  vs.  Virtus Multi Sector Short

Global Bond Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Bond Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Global Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Multi Sector

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Multi Sector Short are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Multi-sector is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Bond and Virtus Multi-sector

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

The idea behind Global Bond Fund and Virtus Multi Sector Short 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.