Correlation Between Virtus Tax and Virtus Global

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

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

Diversification Opportunities for Virtus Tax and Virtus Global

0.63

Correlation Coefficient

Virtus Tax  Virtus Global

Poor diversification

The 3 months correlation between Virtus and Virtus is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Tax Exempt Bond and Virtus Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Global Infras and Virtus Tax 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 Tax Exempt Bond are associated (or correlated) with Virtus Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Global Infras has no effect on the direction of Virtus Tax i.e., Virtus Tax and Virtus Global go up and down completely randomly.

Pair Corralation between Virtus Tax and Virtus Global

Assuming the 90 days horizon Virtus Tax Exempt Bond is expected to generate 0.18 times more return on investment than Virtus Global. However, Virtus Tax Exempt Bond is 5.66 times less risky than Virtus Global. It trades about -0.35 of its potential returns per unit of risk. Virtus Global Infrastructure is currently generating about -0.37 per unit of risk. If you would invest  1,035  in Virtus Tax Exempt Bond on October 4, 2024 and sell it today you would lose (15.00) from holding Virtus Tax Exempt Bond or give up 1.45% of portfolio value over 90 days.

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

Virtus Tax Exempt Bond  vs.  Virtus Global Infrastructure

Virtus Tax Exempt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus Global Infras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Global Infrastructure has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Tax and Virtus Global

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

The idea behind Virtus Tax Exempt Bond and Virtus Global Infrastructure 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.