Correlation Between Small Cap and Virtus Rampart

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

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

Diversification Opportunities for Small Cap and Virtus Rampart

0.84

Correlation Coefficient

Small Cap  Virtus Rampart

Very poor diversification

The 3 months correlation between Small and Virtus is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Virtus Rampart Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Rampart Enhanced and Small Cap 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 Small Cap Stock are associated (or correlated) with Virtus Rampart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Rampart Enhanced has no effect on the direction of Small Cap i.e., Small Cap and Virtus Rampart go up and down completely randomly.

Pair Corralation between Small Cap and Virtus Rampart

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Virtus Rampart. In addition to that, Small Cap is 1.19 times more volatile than Virtus Rampart Enhanced. It trades about -0.42 of its total potential returns per unit of risk. Virtus Rampart Enhanced is currently generating about -0.29 per unit of volatility. If you would invest  2,171  in Virtus Rampart Enhanced on October 4, 2024 and sell it today you would lose (168.00) from holding Virtus Rampart Enhanced or give up 7.74% of portfolio value over 90 days.

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

Small Cap Stock  vs.  Virtus Rampart Enhanced

Small Cap Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Virtus Rampart Enhanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Small Cap and Virtus Rampart

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

The idea behind Small Cap Stock and Virtus Rampart Enhanced 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.