Correlation Between Vanguard Core and Virtus Newfleet

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

By analyzing existing cross correlation between Vanguard Core Bond and Virtus Newfleet ABSMBS, you can compare the effects of market volatilities on Vanguard Core and Virtus Newfleet 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 Vanguard Core with a short position of Virtus Newfleet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Core and Virtus Newfleet.

Diversification Opportunities for Vanguard Core and Virtus Newfleet

0.35

Correlation Coefficient

Vanguard Core  Virtus Newfleet

Weak diversification

The 3 months correlation between Vanguard and Virtus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Core Bond and Virtus Newfleet ABSMBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet ABSMBS and Vanguard Core 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 Vanguard Core Bond are associated (or correlated) with Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet ABSMBS has no effect on the direction of Vanguard Core i.e., Vanguard Core and Virtus Newfleet go up and down completely randomly.

Pair Corralation between Vanguard Core and Virtus Newfleet

Given the investment horizon of 90 days Vanguard Core Bond is expected to generate 1.39 times more return on investment than Virtus Newfleet. However, Vanguard Core is 1.39 times more volatile than Virtus Newfleet ABSMBS. It trades about 0.35 of its potential returns per unit of risk. Virtus Newfleet ABSMBS is currently generating about 0.21 per unit of risk. If you would invest  7,601  in Vanguard Core Bond on December 2, 2024 and sell it today you would earn a total of  170.00  from holding Vanguard Core Bond or generate 2.24% return on investment over 90 days.

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

Vanguard Core Bond  vs.  Virtus Newfleet ABSMBS

Vanguard Core Bond

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Core Bond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Vanguard Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Core and Virtus Newfleet

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

The idea behind Vanguard Core Bond and Virtus Newfleet ABSMBS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.