Correlation Between Virtus Convertible and Schwab Government

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

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

Diversification Opportunities for Virtus Convertible and Schwab Government

-0.4

Correlation Coefficient

Virtus Convertible  Schwab Government

Very good diversification

The 3 months correlation between Virtus and Schwab is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Convertible and Schwab Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Government Money 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 Schwab Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Government Money has no effect on the direction of Virtus Convertible i.e., Virtus Convertible and Schwab Government go up and down completely randomly.

Pair Corralation between Virtus Convertible and Schwab Government

Assuming the 90 days horizon Virtus Convertible is expected to generate 4.42 times more return on investment than Schwab Government. However, Virtus Convertible is 4.42 times more volatile than Schwab Government Money. It trades about 0.07 of its potential returns per unit of risk. Schwab Government Money is currently generating about 0.13 per unit of risk. If you would invest  2,855  in Virtus Convertible on December 5, 2024 and sell it today you would earn a total of  635.00  from holding Virtus Convertible or generate 22.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.94%
Values	Daily Returns

Virtus Convertible  vs.  Schwab Government Money

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.

Schwab Government Money

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Government Money are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Schwab Government 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 Schwab Government

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

The idea behind Virtus Convertible and Schwab Government Money 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.