Correlation Between Virtus Dividend and Absolute Capital

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

By analyzing existing cross correlation between Virtus Dividend Interest and Absolute Capital Asset, you can compare the effects of market volatilities on Virtus Dividend and Absolute Capital 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 Dividend with a short position of Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Dividend and Absolute Capital.

Diversification Opportunities for Virtus Dividend and Absolute Capital

0.66

Correlation Coefficient

Virtus Dividend  Absolute Capital

Poor diversification

The 3 months correlation between Virtus and Absolute is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Dividend Interest and Absolute Capital Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Asset and Virtus Dividend 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 Dividend Interest are associated (or correlated) with Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Asset has no effect on the direction of Virtus Dividend i.e., Virtus Dividend and Absolute Capital go up and down completely randomly.

Pair Corralation between Virtus Dividend and Absolute Capital

Considering the 90-day investment horizon Virtus Dividend Interest is expected to under-perform the Absolute Capital. In addition to that, Virtus Dividend is 1.11 times more volatile than Absolute Capital Asset. It trades about -0.1 of its total potential returns per unit of risk. Absolute Capital Asset is currently generating about -0.05 per unit of volatility. If you would invest  1,217  in Absolute Capital Asset on September 25, 2024 and sell it today you would lose (10.00) from holding Absolute Capital Asset or give up 0.82% of portfolio value over 90 days.

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

Virtus Dividend Interest  vs.  Absolute Capital Asset

Virtus Dividend Interest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Dividend Interest has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively steady technical and fundamental indicators, Virtus Dividend is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Absolute Capital Asset

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Capital Asset are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virtus Dividend and Absolute Capital

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

The idea behind Virtus Dividend Interest and Absolute Capital Asset 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.