Correlation Between Virtus AllianzGI and DTF Tax

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

By analyzing existing cross correlation between Virtus AllianzGI Convertible and DTF Tax Free, you can compare the effects of market volatilities on Virtus AllianzGI and DTF Tax 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 Virtus AllianzGI with a short position of DTF Tax. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus AllianzGI and DTF Tax.

Diversification Opportunities for Virtus AllianzGI and DTF Tax

-0.59

Correlation Coefficient

Virtus AllianzGI  DTF Tax

Excellent diversification

The 3 months correlation between Virtus and DTF is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Virtus AllianzGI Convertible and DTF Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTF Tax Free and Virtus AllianzGI 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 Virtus AllianzGI Convertible are associated (or correlated) with DTF Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTF Tax Free has no effect on the direction of Virtus AllianzGI i.e., Virtus AllianzGI and DTF Tax go up and down completely randomly.

Pair Corralation between Virtus AllianzGI and DTF Tax

Assuming the 90 days trading horizon Virtus AllianzGI Convertible is expected to under-perform the DTF Tax. But the preferred stock apears to be less risky and, when comparing its historical volatility, Virtus AllianzGI Convertible is 1.06 times less risky than DTF Tax. The preferred stock trades about -0.25 of its potential returns per unit of risk. The DTF Tax Free is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  1,125  in DTF Tax Free on September 21, 2024 and sell it today you would lose (21.00) from holding DTF Tax Free or give up 1.87% of portfolio value over 90 days.

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

Virtus AllianzGI Convertible  vs.  DTF Tax Free

Virtus AllianzGI Con

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus AllianzGI Convertible has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

DTF Tax Free

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days DTF Tax Free has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DTF Tax is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Virtus AllianzGI and DTF Tax

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

The idea behind Virtus AllianzGI Convertible and DTF Tax Free 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.