Correlation Between Virtus Kar and Mid Cap

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

Diversification Opportunities for Virtus Kar and Mid Cap

0.97

Correlation Coefficient

Virtus Kar  Mid Cap

Almost no diversification

The 3 months correlation between Virtus and Mid is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Small Cap and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Virtus Kar i.e., Virtus Kar and Mid Cap go up and down completely randomly.

Pair Corralation between Virtus Kar and Mid Cap

Assuming the 90 days horizon Virtus Kar is expected to generate 1.51 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Virtus Kar Small Cap is 1.06 times less risky than Mid Cap. It trades about 0.13 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,868  in Mid Cap Growth on September 18, 2024 and sell it today you would earn a total of  516.00  from holding Mid Cap Growth or generate 13.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Virtus Kar Small Cap  vs.  Mid Cap Growth

Virtus Kar Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Small Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Virtus Kar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mid Cap Growth

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Virtus Kar and Mid Cap

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

The idea behind Virtus Kar Small Cap and Mid Cap Growth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.