Correlation Between Midcap Fund and Virtus Kar

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

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

Diversification Opportunities for Midcap Fund and Virtus Kar

0.83

Correlation Coefficient

Midcap Fund  Virtus Kar

Very poor diversification

The 3 months correlation between Midcap and Virtus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Virtus Kar Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Mid and Midcap Fund 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 Midcap Fund Institutional are associated (or correlated) with Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Mid has no effect on the direction of Midcap Fund i.e., Midcap Fund and Virtus Kar go up and down completely randomly.

Pair Corralation between Midcap Fund and Virtus Kar

Assuming the 90 days horizon Midcap Fund Institutional is expected to generate 0.85 times more return on investment than Virtus Kar. However, Midcap Fund Institutional is 1.18 times less risky than Virtus Kar. It trades about -0.02 of its potential returns per unit of risk. Virtus Kar Mid Cap is currently generating about -0.12 per unit of risk. If you would invest  4,471  in Midcap Fund Institutional on December 29, 2024 and sell it today you would lose (70.00) from holding Midcap Fund Institutional or give up 1.57% of portfolio value over 90 days.

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

Midcap Fund Institutional  vs.  Virtus Kar Mid Cap

Midcap Fund Institutional

Risk-Adjusted Performance

Very Weak

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

Virtus Kar Mid

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Midcap Fund Institutional and Virtus Kar Mid 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.