Correlation Between Virtus Real and Vanguard Short-term

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

By analyzing existing cross correlation between Virtus Real Estate and Vanguard Short Term Porate, you can compare the effects of market volatilities on Virtus Real and Vanguard Short-term 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 Real with a short position of Vanguard Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Real and Vanguard Short-term.

Diversification Opportunities for Virtus Real and Vanguard Short-term

-0.06

Correlation Coefficient

Virtus Real  Vanguard Short-term

Good diversification

The 3 months correlation between Virtus and Vanguard is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Real Estate and Vanguard Short Term Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Short Term and Virtus Real 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 Real Estate are associated (or correlated) with Vanguard Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Virtus Real i.e., Virtus Real and Vanguard Short-term go up and down completely randomly.

Pair Corralation between Virtus Real and Vanguard Short-term

Assuming the 90 days horizon Virtus Real Estate is expected to generate 6.46 times more return on investment than Vanguard Short-term. However, Virtus Real is 6.46 times more volatile than Vanguard Short Term Porate. It trades about 0.18 of its potential returns per unit of risk. Vanguard Short Term Porate is currently generating about 0.48 per unit of risk. If you would invest  1,883  in Virtus Real Estate on December 5, 2024 and sell it today you would earn a total of  47.00  from holding Virtus Real Estate or generate 2.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Virtus Real Estate  vs.  Vanguard Short Term Porate

Virtus Real Estate

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Porate are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Vanguard Short-term 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 Real and Vanguard Short-term

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

The idea behind Virtus Real Estate and Vanguard Short Term Porate 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.