Correlation Between Science Technology and Virtus Ceredex

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

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

Diversification Opportunities for Science Technology and Virtus Ceredex

0.88

Correlation Coefficient

Science Technology  Virtus Ceredex

Very poor diversification

The 3 months correlation between Science and Virtus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Virtus Ceredex Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Ceredex Small and Science Technology 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 Science Technology Fund are associated (or correlated) with Virtus Ceredex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Ceredex Small has no effect on the direction of Science Technology i.e., Science Technology and Virtus Ceredex go up and down completely randomly.

Pair Corralation between Science Technology and Virtus Ceredex

Assuming the 90 days horizon Science Technology Fund is expected to generate 1.16 times more return on investment than Virtus Ceredex. However, Science Technology is 1.16 times more volatile than Virtus Ceredex Small Cap. It trades about 0.1 of its potential returns per unit of risk. Virtus Ceredex Small Cap is currently generating about 0.08 per unit of risk. If you would invest  2,519  in Science Technology Fund on September 15, 2024 and sell it today you would earn a total of  437.00  from holding Science Technology Fund or generate 17.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Science Technology Fund  vs.  Virtus Ceredex Small Cap

Science Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Science Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Virtus Ceredex Small

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Ceredex Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Ceredex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Science Technology and Virtus Ceredex

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

The idea behind Science Technology Fund and Virtus Ceredex 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.