Correlation Between Virtus Seix and Steward Ered

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

By analyzing existing cross correlation between Virtus Seix Government and Steward Ered Call, you can compare the effects of market volatilities on Virtus Seix and Steward Ered 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 Seix with a short position of Steward Ered. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Seix and Steward Ered.

Diversification Opportunities for Virtus Seix and Steward Ered

0.72

Correlation Coefficient

Virtus Seix  Steward Ered

Poor diversification

The 3 months correlation between Virtus and Steward is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Seix Government and Steward Ered Call in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Ered Call and Virtus Seix 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 Seix Government are associated (or correlated) with Steward Ered. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Ered Call has no effect on the direction of Virtus Seix i.e., Virtus Seix and Steward Ered go up and down completely randomly.

Pair Corralation between Virtus Seix and Steward Ered

Assuming the 90 days horizon Virtus Seix is expected to generate 7.78 times less return on investment than Steward Ered. But when comparing it to its historical volatility, Virtus Seix Government is 5.02 times less risky than Steward Ered. It trades about 0.1 of its potential returns per unit of risk. Steward Ered Call is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  802.00  in Steward Ered Call on September 12, 2024 and sell it today you would earn a total of  32.00  from holding Steward Ered Call or generate 3.99% return on investment over 90 days.

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

Virtus Seix Government  vs.  Steward Ered Call

Virtus Seix Government

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Seix Government are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Virtus Seix is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Steward Ered Call

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Steward Ered Call are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Steward Ered 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 Seix and Steward Ered

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

The idea behind Virtus Seix Government and Steward Ered Call 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.