Correlation Between Virtus Investment and GMO Internet

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

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

Diversification Opportunities for Virtus Investment and GMO Internet

0.71

Correlation Coefficient

Virtus Investment  GMO Internet

Poor diversification

The 3 months correlation between Virtus and GMO is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Investment Partners and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet and Virtus Investment 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 Investment Partners are associated (or correlated) with GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of Virtus Investment i.e., Virtus Investment and GMO Internet go up and down completely randomly.

Pair Corralation between Virtus Investment and GMO Internet

Assuming the 90 days horizon Virtus Investment Partners is expected to under-perform the GMO Internet. But the stock apears to be less risky and, when comparing its historical volatility, Virtus Investment Partners is 1.01 times less risky than GMO Internet. The stock trades about -0.32 of its potential returns per unit of risk. The GMO Internet is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,710  in GMO Internet on October 10, 2024 and sell it today you would lose (80.00) from holding GMO Internet or give up 4.68% of portfolio value over 90 days.

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

Virtus Investment Partners  vs.  GMO Internet

Virtus Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtus Investment reported solid returns over the last few months and may actually be approaching a breakup point.

GMO Internet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, GMO Internet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Virtus Investment and GMO Internet

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

The idea behind Virtus Investment Partners and GMO Internet 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.