Correlation Between Global Opportunity and Virtus Kar

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

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

Diversification Opportunities for Global Opportunity and Virtus Kar

0.59

Correlation Coefficient

Global Opportunity  Virtus Kar

Very weak diversification

The 3 months correlation between Global and Virtus is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Global Opportunity Portfolio and Virtus Kar Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Mid and Global Opportunity 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 Global Opportunity Portfolio 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 Mid has no effect on the direction of Global Opportunity i.e., Global Opportunity and Virtus Kar go up and down completely randomly.

Pair Corralation between Global Opportunity and Virtus Kar

Assuming the 90 days horizon Global Opportunity Portfolio is expected to generate 1.11 times more return on investment than Virtus Kar. However, Global Opportunity is 1.11 times more volatile than Virtus Kar Mid Cap. It trades about -0.01 of its potential returns per unit of risk. Virtus Kar Mid Cap is currently generating about -0.12 per unit of risk. If you would invest  3,514  in Global Opportunity Portfolio on December 29, 2024 and sell it today you would lose (50.00) from holding Global Opportunity Portfolio or give up 1.42% of portfolio value over 90 days.

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

Global Opportunity Portfolio  vs.  Virtus Kar Mid Cap

Global Opportunity

Risk-Adjusted Performance

Very Weak

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

Virtus Kar Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Kar Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Global Opportunity and Virtus Kar

The main advantage of trading using opposite Global Opportunity and Virtus Kar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Opportunity 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 Global Opportunity Portfolio and Virtus Kar Mid 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.