Correlation Between Virtus Kar and Global Stock

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

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

Diversification Opportunities for Virtus Kar and Global Stock

0.5

Correlation Coefficient

Virtus Kar  Global Stock

Very weak diversification

The 3 months correlation between Virtus and Global is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Small Cap and Global Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Stock and Virtus Kar 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 Kar Small Cap are associated (or correlated) with Global Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Stock has no effect on the direction of Virtus Kar i.e., Virtus Kar and Global Stock go up and down completely randomly.

Pair Corralation between Virtus Kar and Global Stock

Assuming the 90 days horizon Virtus Kar Small Cap is expected to generate 1.08 times more return on investment than Global Stock. However, Virtus Kar is 1.08 times more volatile than Global Stock Fund. It trades about 0.06 of its potential returns per unit of risk. Global Stock Fund is currently generating about -0.03 per unit of risk. If you would invest  4,851  in Virtus Kar Small Cap on September 27, 2024 and sell it today you would earn a total of  448.00  from holding Virtus Kar Small Cap or generate 9.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Virtus Kar Small Cap  vs.  Global Stock Fund

Virtus Kar Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Global Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Stock Fund 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.

Pair Trading with Virtus Kar and Global Stock

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

The idea behind Virtus Kar Small Cap and Global Stock 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.