Correlation Between Virtus Convertible and Municipal Bond

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

By analyzing existing cross correlation between Virtus Convertible and Municipal Bond Portfolio, you can compare the effects of market volatilities on Virtus Convertible and Municipal Bond 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 Municipal Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Convertible and Municipal Bond.

Diversification Opportunities for Virtus Convertible and Municipal Bond

-0.41

Correlation Coefficient

Virtus Convertible  Municipal Bond

Very good diversification

The 3 months correlation between Virtus and Municipal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Convertible and Municipal Bond Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Municipal Bond Portfolio 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 Municipal Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Municipal Bond Portfolio has no effect on the direction of Virtus Convertible i.e., Virtus Convertible and Municipal Bond go up and down completely randomly.

Pair Corralation between Virtus Convertible and Municipal Bond

Assuming the 90 days horizon Virtus Convertible is expected to generate 3.16 times more return on investment than Municipal Bond. However, Virtus Convertible is 3.16 times more volatile than Municipal Bond Portfolio. It trades about 0.36 of its potential returns per unit of risk. Municipal Bond Portfolio is currently generating about 0.04 per unit of risk. If you would invest  3,289  in Virtus Convertible on September 3, 2024 and sell it today you would earn a total of  433.00  from holding Virtus Convertible or generate 13.17% return on investment over 90 days.

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

Virtus Convertible  vs.  Municipal Bond Portfolio

Virtus Convertible

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Convertible are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Virtus Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Municipal Bond Portfolio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Municipal Bond Portfolio are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Municipal Bond 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 Municipal Bond

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

The idea behind Virtus Convertible and Municipal Bond Portfolio 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.