Correlation Between Virtus Real and Royce Opportunity

Can any of the company-specific risk be diversified away by investing in both Virtus Real and Royce Opportunity 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 Royce Opportunity 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 Royce Opportunity Fund, you can compare the effects of market volatilities on Virtus Real and Royce Opportunity 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 Royce Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Real and Royce Opportunity.

Diversification Opportunities for Virtus Real and Royce Opportunity

0.87

Correlation Coefficient

Virtus Real  Royce Opportunity

Very poor diversification

The 3 months correlation between Virtus and Royce is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Real Estate and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity 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 Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of Virtus Real i.e., Virtus Real and Royce Opportunity go up and down completely randomly.

Pair Corralation between Virtus Real and Royce Opportunity

Assuming the 90 days horizon Virtus Real Estate is expected to generate 0.63 times more return on investment than Royce Opportunity. However, Virtus Real Estate is 1.59 times less risky than Royce Opportunity. It trades about 0.13 of its potential returns per unit of risk. Royce Opportunity Fund is currently generating about -0.22 per unit of risk. If you would invest  1,882  in Virtus Real Estate on November 29, 2024 and sell it today you would earn a total of  35.00  from holding Virtus Real Estate or generate 1.86% return on investment over 90 days.

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

Virtus Real Estate  vs.  Royce Opportunity Fund

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 forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Royce Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Opportunity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Virtus Real and Royce Opportunity

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

The idea behind Virtus Real Estate and Royce Opportunity Fund 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 Anywhere module to track or share privately all of your investments from the convenience of any device.