Correlation Between Mueller Industries and Virtu Financial

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

By analyzing existing cross correlation between Mueller Industries and Virtu Financial, you can compare the effects of market volatilities on Mueller Industries and Virtu Financial 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 Mueller Industries with a short position of Virtu Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Industries and Virtu Financial.

Diversification Opportunities for Mueller Industries and Virtu Financial

-0.08

Correlation Coefficient

Mueller Industries  Virtu Financial

Good diversification

The 3 months correlation between Mueller and Virtu is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and Virtu Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtu Financial and Mueller Industries 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 Mueller Industries are associated (or correlated) with Virtu Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtu Financial has no effect on the direction of Mueller Industries i.e., Mueller Industries and Virtu Financial go up and down completely randomly.

Pair Corralation between Mueller Industries and Virtu Financial

Assuming the 90 days horizon Mueller Industries is expected to generate 0.93 times more return on investment than Virtu Financial. However, Mueller Industries is 1.08 times less risky than Virtu Financial. It trades about 0.2 of its potential returns per unit of risk. Virtu Financial is currently generating about 0.15 per unit of risk. If you would invest  7,550  in Mueller Industries on October 24, 2024 and sell it today you would earn a total of  500.00  from holding Mueller Industries or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Mueller Industries  vs.  Virtu Financial

Mueller Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mueller Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mueller Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Virtu Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Virtu Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mueller Industries and Virtu Financial

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

The idea behind Mueller Industries and Virtu Financial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.