Correlation Between Rbc Small and Virtus Kar

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

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

Diversification Opportunities for Rbc Small and Virtus Kar

0.76

Correlation Coefficient

Rbc Small  Virtus Kar

Poor diversification

The 3 months correlation between Rbc and Virtus is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Rbc Small Cap and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small and Rbc Small 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 Rbc Small Cap are associated (or correlated) with Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Rbc Small i.e., Rbc Small and Virtus Kar go up and down completely randomly.

Pair Corralation between Rbc Small and Virtus Kar

Assuming the 90 days horizon Rbc Small Cap is expected to under-perform the Virtus Kar. In addition to that, Rbc Small is 1.38 times more volatile than Virtus Kar Small Cap. It trades about -0.01 of its total potential returns per unit of risk. Virtus Kar Small Cap is currently generating about 0.05 per unit of volatility. If you would invest  2,149  in Virtus Kar Small Cap on October 5, 2024 and sell it today you would earn a total of  413.00  from holding Virtus Kar Small Cap or generate 19.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.68%
Values	Daily Returns

Rbc Small Cap  vs.  Virtus Kar Small Cap

Rbc Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rbc Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Virtus Kar Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rbc Small and Virtus Kar

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

The idea behind Rbc Small Cap and Virtus Kar Small Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.