Correlation Between Virtus Convertible and American Century

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

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

Diversification Opportunities for Virtus Convertible and American Century

0.77

Correlation Coefficient

Virtus Convertible  American Century

Poor diversification

The 3 months correlation between Virtus and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Convertible and American Century One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century One and Virtus Convertible 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 Virtus Convertible are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century One has no effect on the direction of Virtus Convertible i.e., Virtus Convertible and American Century go up and down completely randomly.

Pair Corralation between Virtus Convertible and American Century

Assuming the 90 days horizon Virtus Convertible is expected to under-perform the American Century. But the mutual fund apears to be less risky and, when comparing its historical volatility, Virtus Convertible is 1.16 times less risky than American Century. The mutual fund trades about -0.04 of its potential returns per unit of risk. The American Century One is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,108  in American Century One on December 30, 2024 and sell it today you would lose (18.00) from holding American Century One or give up 1.62% of portfolio value over 90 days.

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

Virtus Convertible  vs.  American Century One

Virtus Convertible

Risk-Adjusted Performance

Very Weak

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

American Century One

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Virtus Convertible and American Century

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

The idea behind Virtus Convertible and American Century One 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.