Correlation Between Kinetics Small and Virtus High

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

By analyzing existing cross correlation between Kinetics Small Cap and Virtus High Yield, you can compare the effects of market volatilities on Kinetics Small and Virtus High 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 Kinetics Small with a short position of Virtus High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetics Small and Virtus High.

Diversification Opportunities for Kinetics Small and Virtus High

0.03

Correlation Coefficient

Kinetics Small  Virtus High

Significant diversification

The 3 months correlation between Kinetics and Virtus is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kinetics Small Cap and Virtus High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus High Yield and Kinetics Small 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 Kinetics Small Cap are associated (or correlated) with Virtus High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus High Yield has no effect on the direction of Kinetics Small i.e., Kinetics Small and Virtus High go up and down completely randomly.

Pair Corralation between Kinetics Small and Virtus High

Assuming the 90 days horizon Kinetics Small Cap is expected to under-perform the Virtus High. In addition to that, Kinetics Small is 10.49 times more volatile than Virtus High Yield. It trades about -0.04 of its total potential returns per unit of risk. Virtus High Yield is currently generating about 0.07 per unit of volatility. If you would invest  379.00  in Virtus High Yield on December 4, 2024 and sell it today you would earn a total of  3.00  from holding Virtus High Yield or generate 0.79% return on investment over 90 days.

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

Kinetics Small Cap  vs.  Virtus High Yield

Kinetics Small Cap

Risk-Adjusted Performance

Very Weak

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

Virtus High Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus High Yield are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Virtus High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kinetics Small and Virtus High

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

The idea behind Kinetics Small Cap and Virtus High Yield 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.