Correlation Between Virtus Convertible and Touchstone Value

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

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

Diversification Opportunities for Virtus Convertible and Touchstone Value

0.84

Correlation Coefficient

Virtus Convertible  Touchstone Value

Very poor diversification

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

Pair Corralation between Virtus Convertible and Touchstone Value

Assuming the 90 days horizon Virtus Convertible is expected to under-perform the Touchstone Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Virtus Convertible is 1.03 times less risky than Touchstone Value. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Touchstone Value Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,188  in Touchstone Value Fund on December 22, 2024 and sell it today you would lose (10.00) from holding Touchstone Value Fund or give up 0.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Virtus Convertible  vs.  Touchstone Value Fund

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.

Touchstone Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Touchstone Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Touchstone Value 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 Touchstone Value

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

The idea behind Virtus Convertible and Touchstone Value Fund 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.