Correlation Between Ridgeworth International and Virtus Emerging

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

By analyzing existing cross correlation between Ridgeworth International Equity and Virtus Emerging Markets, you can compare the effects of market volatilities on Ridgeworth International and Virtus Emerging 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 Ridgeworth International with a short position of Virtus Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ridgeworth International and Virtus Emerging.

Diversification Opportunities for Ridgeworth International and Virtus Emerging

0.8

Correlation Coefficient

Ridgeworth International  Virtus Emerging

Very poor diversification

The 3 months correlation between Ridgeworth and Virtus is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ridgeworth International Equit and Virtus Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Emerging Markets and Ridgeworth International 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 Ridgeworth International Equity are associated (or correlated) with Virtus Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Emerging Markets has no effect on the direction of Ridgeworth International i.e., Ridgeworth International and Virtus Emerging go up and down completely randomly.

Pair Corralation between Ridgeworth International and Virtus Emerging

Assuming the 90 days horizon Ridgeworth International Equity is expected to under-perform the Virtus Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ridgeworth International Equity is 1.23 times less risky than Virtus Emerging. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Virtus Emerging Markets is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  672.00  in Virtus Emerging Markets on September 14, 2024 and sell it today you would lose (5.00) from holding Virtus Emerging Markets or give up 0.74% of portfolio value over 90 days.

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

Ridgeworth International Equit  vs.  Virtus Emerging Markets

Ridgeworth International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Virtus Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ridgeworth International and Virtus Emerging

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

The idea behind Ridgeworth International Equity and Virtus Emerging Markets 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 Transaction History module to view history of all your transactions and understand their impact on performance.