Correlation Between International Opportunity and Virtus International

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

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

Diversification Opportunities for International Opportunity and Virtus International

0.23

Correlation Coefficient

International Opportunity  Virtus International

Modest diversification

The 3 months correlation between International and Virtus is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding International Opportunity Port and Virtus International Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus International and International 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 International Opportunity Portfolio are associated (or correlated) with Virtus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus International has no effect on the direction of International Opportunity i.e., International Opportunity and Virtus International go up and down completely randomly.

Pair Corralation between International Opportunity and Virtus International

Assuming the 90 days horizon International Opportunity Portfolio is expected to generate 1.39 times more return on investment than Virtus International. However, International Opportunity is 1.39 times more volatile than Virtus International Small Cap. It trades about -0.2 of its potential returns per unit of risk. Virtus International Small Cap is currently generating about -0.42 per unit of risk. If you would invest  2,876  in International Opportunity Portfolio on October 11, 2024 and sell it today you would lose (104.00) from holding International Opportunity Portfolio or give up 3.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

International Opportunity Port  vs.  Virtus International Small Cap

International Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus International Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 International Opportunity and Virtus International

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

The idea behind International Opportunity Portfolio and Virtus International Small 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.