Correlation Between Real Return and Virtus Multi

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

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

Diversification Opportunities for Real Return and Virtus Multi

0.5

Correlation Coefficient

Real Return  Virtus Multi

Very weak diversification

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

Pair Corralation between Real Return and Virtus Multi

Assuming the 90 days horizon Real Return is expected to generate 1.78 times less return on investment than Virtus Multi. In addition to that, Real Return is 2.05 times more volatile than Virtus Multi Sector Short. It trades about 0.05 of its total potential returns per unit of risk. Virtus Multi Sector Short is currently generating about 0.17 per unit of volatility. If you would invest  414.00  in Virtus Multi Sector Short on September 12, 2024 and sell it today you would earn a total of  42.00  from holding Virtus Multi Sector Short or generate 10.14% return on investment over 90 days.

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

Real Return Fund  vs.  Virtus Multi Sector Short

Real Return Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus Multi Sector

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Multi Sector Short are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Real Return and Virtus Multi

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

The idea behind Real Return Fund and Virtus Multi Sector Short 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.