Correlation Between Victory Tax-exempt and Virginia Bond

Can any of the company-specific risk be diversified away by investing in both Victory Tax-exempt and Virginia Bond 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 Victory Tax-exempt and Virginia Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Victory Tax Exempt Fund and Virginia Bond Fund, you can compare the effects of market volatilities on Victory Tax-exempt and Virginia Bond 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 Victory Tax-exempt with a short position of Virginia Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Tax-exempt and Virginia Bond.

Diversification Opportunities for Victory Tax-exempt and Virginia Bond

0.95

Correlation Coefficient

Victory Tax-exempt  Virginia Bond

Almost no diversification

The 3 months correlation between Victory and Virginia is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Victory Tax Exempt Fund and Virginia Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virginia Bond and Victory Tax-exempt 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 Victory Tax Exempt Fund are associated (or correlated) with Virginia Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virginia Bond has no effect on the direction of Victory Tax-exempt i.e., Victory Tax-exempt and Virginia Bond go up and down completely randomly.

Pair Corralation between Victory Tax-exempt and Virginia Bond

Assuming the 90 days horizon Victory Tax Exempt Fund is expected to under-perform the Virginia Bond. In addition to that, Victory Tax-exempt is 1.13 times more volatile than Virginia Bond Fund. It trades about -0.07 of its total potential returns per unit of risk. Virginia Bond Fund is currently generating about -0.05 per unit of volatility. If you would invest  1,036  in Virginia Bond Fund on December 30, 2024 and sell it today you would lose (10.00) from holding Virginia Bond Fund or give up 0.97% of portfolio value over 90 days.

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

Victory Tax Exempt Fund  vs.  Virginia Bond Fund

Victory Tax Exempt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Victory Tax Exempt Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Victory Tax-exempt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virginia Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virginia Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virginia Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Victory Tax-exempt and Virginia Bond

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

The idea behind Victory Tax Exempt Fund and Virginia Bond Fund 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.