Correlation Between Gmo Core and Virtus Kar

Can any of the company-specific risk be diversified away by investing in both Gmo Core 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 Core 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 E Plus and Virtus Kar Small Cap, you can compare the effects of market volatilities on Gmo Core 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 Core with a short position of Virtus Kar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gmo Core and Virtus Kar.

Diversification Opportunities for Gmo Core and Virtus Kar

-0.71

Correlation Coefficient

Gmo Core  Virtus Kar

Pay attention - limited upside

The 3 months correlation between Gmo and Virtus is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Gmo E Plus 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 Core 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 E Plus 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 Core i.e., Gmo Core and Virtus Kar go up and down completely randomly.

Pair Corralation between Gmo Core and Virtus Kar

Assuming the 90 days horizon Gmo E Plus is expected to under-perform the Virtus Kar. But the mutual fund apears to be less risky and, when comparing its historical volatility, Gmo E Plus is 3.61 times less risky than Virtus Kar. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Virtus Kar Small Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,584  in Virtus Kar Small Cap on August 30, 2024 and sell it today you would earn a total of  347.00  from holding Virtus Kar Small Cap or generate 13.43% return on investment over 90 days.

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

Gmo E Plus  vs.  Virtus Kar Small Cap

Gmo E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Virtus Kar showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gmo Core and Virtus Kar

The main advantage of trading using opposite Gmo Core and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gmo Core 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 E Plus 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.

Check out your portfolio center.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.