Correlation Between Virtus Newfleet and NuShares Enhanced

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

By analyzing existing cross correlation between Virtus Newfleet Multi Sector and NuShares Enhanced Yield, you can compare the effects of market volatilities on Virtus Newfleet and NuShares Enhanced 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 Newfleet with a short position of NuShares Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Newfleet and NuShares Enhanced.

Diversification Opportunities for Virtus Newfleet and NuShares Enhanced

0.96

Correlation Coefficient

Virtus Newfleet  NuShares Enhanced

Almost no diversification

The 3 months correlation between Virtus and NuShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Newfleet Multi Sector and NuShares Enhanced Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuShares Enhanced Yield and Virtus Newfleet 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 Newfleet Multi Sector are associated (or correlated) with NuShares Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuShares Enhanced Yield has no effect on the direction of Virtus Newfleet i.e., Virtus Newfleet and NuShares Enhanced go up and down completely randomly.

Pair Corralation between Virtus Newfleet and NuShares Enhanced

Given the investment horizon of 90 days Virtus Newfleet is expected to generate 1.79 times less return on investment than NuShares Enhanced. But when comparing it to its historical volatility, Virtus Newfleet Multi Sector is 1.05 times less risky than NuShares Enhanced. It trades about 0.06 of its potential returns per unit of risk. NuShares Enhanced Yield is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,050  in NuShares Enhanced Yield on December 29, 2024 and sell it today you would earn a total of  40.00  from holding NuShares Enhanced Yield or generate 1.95% return on investment over 90 days.

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

Virtus Newfleet Multi Sector  vs.  NuShares Enhanced Yield

Virtus Newfleet Multi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet Multi Sector are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Virtus Newfleet is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

NuShares Enhanced Yield

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NuShares Enhanced Yield are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NuShares Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Virtus Newfleet and NuShares Enhanced

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

The idea behind Virtus Newfleet Multi Sector and NuShares Enhanced Yield 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.