Correlation Between Virtus Bond and Virtus Multi-strategy

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

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

Diversification Opportunities for Virtus Bond and Virtus Multi-strategy

0.88

Correlation Coefficient

Virtus Bond  Virtus Multi-strategy

Very poor diversification

The 3 months correlation between Virtus and Virtus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Bond Fund and Virtus Multi Strategy Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Multi Strategy and Virtus Bond 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 Bond Fund are associated (or correlated) with Virtus Multi-strategy. 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 Strategy has no effect on the direction of Virtus Bond i.e., Virtus Bond and Virtus Multi-strategy go up and down completely randomly.

Pair Corralation between Virtus Bond and Virtus Multi-strategy

Assuming the 90 days horizon Virtus Bond Fund is expected to generate 1.63 times more return on investment than Virtus Multi-strategy. However, Virtus Bond is 1.63 times more volatile than Virtus Multi Strategy Target. It trades about 0.28 of its potential returns per unit of risk. Virtus Multi Strategy Target is currently generating about 0.28 per unit of risk. If you would invest  1,011  in Virtus Bond Fund on December 1, 2024 and sell it today you would earn a total of  16.00  from holding Virtus Bond Fund or generate 1.58% return on investment over 90 days.

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

Virtus Bond Fund  vs.  Virtus Multi Strategy Target

Virtus Bond Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Bond Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Multi Strategy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Multi Strategy Target are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Multi-strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virtus Bond and Virtus Multi-strategy

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

The idea behind Virtus Bond Fund and Virtus Multi Strategy Target 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.