Correlation Between Virtus Emerging and Thornburg Developing

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

By analyzing existing cross correlation between Virtus Emerging Markets and Thornburg Developing World, you can compare the effects of market volatilities on Virtus Emerging and Thornburg Developing 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 Virtus Emerging with a short position of Thornburg Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Emerging and Thornburg Developing.

Diversification Opportunities for Virtus Emerging and Thornburg Developing

0.78

Correlation Coefficient

Virtus Emerging  Thornburg Developing

Poor diversification

The 3 months correlation between Virtus and Thornburg is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Emerging Markets and Thornburg Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Developing and Virtus Emerging 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 Virtus Emerging Markets are associated (or correlated) with Thornburg Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Developing has no effect on the direction of Virtus Emerging i.e., Virtus Emerging and Thornburg Developing go up and down completely randomly.

Pair Corralation between Virtus Emerging and Thornburg Developing

Assuming the 90 days horizon Virtus Emerging Markets is expected to under-perform the Thornburg Developing. In addition to that, Virtus Emerging is 1.03 times more volatile than Thornburg Developing World. It trades about -0.01 of its total potential returns per unit of risk. Thornburg Developing World is currently generating about 0.08 per unit of volatility. If you would invest  2,218  in Thornburg Developing World on September 15, 2024 and sell it today you would earn a total of  91.00  from holding Thornburg Developing World or generate 4.1% return on investment over 90 days.

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

Virtus Emerging Markets  vs.  Thornburg Developing World

Virtus Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thornburg Developing

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thornburg Developing World are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Thornburg Developing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virtus Emerging and Thornburg Developing

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

The idea behind Virtus Emerging Markets and Thornburg Developing World 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.