Correlation Between Rational Defensive and Virtus Global

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

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

Diversification Opportunities for Rational Defensive and Virtus Global

-0.25

Correlation Coefficient

Rational Defensive  Virtus Global

Very good diversification

The 3 months correlation between Rational and Virtus is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Virtus Global Multi Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Global Multi and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Virtus Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Global Multi has no effect on the direction of Rational Defensive i.e., Rational Defensive and Virtus Global go up and down completely randomly.

Pair Corralation between Rational Defensive and Virtus Global

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 2.31 times more return on investment than Virtus Global. However, Rational Defensive is 2.31 times more volatile than Virtus Global Multi Sector. It trades about 0.05 of its potential returns per unit of risk. Virtus Global Multi Sector is currently generating about -0.14 per unit of risk. If you would invest  6,494  in Rational Defensive Growth on October 8, 2024 and sell it today you would earn a total of  111.00  from holding Rational Defensive Growth or generate 1.71% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Virtus Global Multi Sector

Rational Defensive Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Virtus Global Multi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rational Defensive and Virtus Global

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

The idea behind Rational Defensive Growth and Virtus Global Multi Sector 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.