Correlation Between Virtus International and Virtus Kar

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

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

Diversification Opportunities for Virtus International and Virtus Kar

0.04

Correlation Coefficient

Virtus International  Virtus Kar

Significant diversification

The 3 months correlation between Virtus and Virtus is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Virtus International Small Cap and Virtus Kar Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Small and Virtus International 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 International Small Cap are associated (or correlated) with Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Small has no effect on the direction of Virtus International i.e., Virtus International and Virtus Kar go up and down completely randomly.

Pair Corralation between Virtus International and Virtus Kar

Assuming the 90 days horizon Virtus International Small Cap is expected to generate 0.66 times more return on investment than Virtus Kar. However, Virtus International Small Cap is 1.51 times less risky than Virtus Kar. It trades about 0.04 of its potential returns per unit of risk. Virtus Kar Small Cap is currently generating about -0.17 per unit of risk. If you would invest  1,914  in Virtus International Small Cap on December 1, 2024 and sell it today you would earn a total of  31.00  from holding Virtus International Small Cap or generate 1.62% return on investment over 90 days.

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

Virtus International Small Cap  vs.  Virtus Kar Small Cap

Virtus International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus International Small Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Kar Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Kar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Virtus International and Virtus Kar

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

The idea behind Virtus International Small Cap and Virtus Kar Small Cap 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.