Correlation Between Short-term Government and Virtus Select

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

By analyzing existing cross correlation between Short Term Government Fund and Virtus Select Mlp, you can compare the effects of market volatilities on Short-term Government and Virtus Select 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 Short-term Government with a short position of Virtus Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Government and Virtus Select.

Diversification Opportunities for Short-term Government and Virtus Select

-0.43

Correlation Coefficient

Short-term Government  Virtus Select

Very good diversification

The 3 months correlation between Short-term and Virtus is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Virtus Select Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Select Mlp and Short-term Government 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 Short Term Government Fund are associated (or correlated) with Virtus Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Select Mlp has no effect on the direction of Short-term Government i.e., Short-term Government and Virtus Select go up and down completely randomly.

Pair Corralation between Short-term Government and Virtus Select

Assuming the 90 days horizon Short-term Government is expected to generate 4.07 times less return on investment than Virtus Select. But when comparing it to its historical volatility, Short Term Government Fund is 11.83 times less risky than Virtus Select. It trades about 0.13 of its potential returns per unit of risk. Virtus Select Mlp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,656  in Virtus Select Mlp on December 31, 2024 and sell it today you would earn a total of  53.00  from holding Virtus Select Mlp or generate 3.2% return on investment over 90 days.

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

Short Term Government Fund  vs.  Virtus Select Mlp

Short Term Government

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Government Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Short-term Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Select Mlp

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Short-term Government and Virtus Select

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

The idea behind Short Term Government Fund and Virtus Select Mlp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.