Correlation Between Sierra Tactical and Virtus Convertible

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

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

Diversification Opportunities for Sierra Tactical and Virtus Convertible

0.46

Correlation Coefficient

Sierra Tactical  Virtus Convertible

Very weak diversification

The 3 months correlation between Sierra and Virtus is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Tactical Bond and Virtus Convertible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Convertible and Sierra Tactical 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 Sierra Tactical Bond are associated (or correlated) with Virtus Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Convertible has no effect on the direction of Sierra Tactical i.e., Sierra Tactical and Virtus Convertible go up and down completely randomly.

Pair Corralation between Sierra Tactical and Virtus Convertible

Assuming the 90 days horizon Sierra Tactical is expected to generate 3.45 times less return on investment than Virtus Convertible. But when comparing it to its historical volatility, Sierra Tactical Bond is 2.92 times less risky than Virtus Convertible. It trades about 0.08 of its potential returns per unit of risk. Virtus Convertible is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,075  in Virtus Convertible on October 7, 2024 and sell it today you would earn a total of  506.00  from holding Virtus Convertible or generate 16.46% return on investment over 90 days.

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

Sierra Tactical Bond  vs.  Virtus Convertible

Sierra Tactical Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus Convertible

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Convertible are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Virtus Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra Tactical and Virtus Convertible

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

The idea behind Sierra Tactical Bond and Virtus Convertible 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 Commodity Directory module to find actively traded commodities issued by global exchanges.