Correlation Between Virtus Kar and Boston Trust

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

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

Diversification Opportunities for Virtus Kar and Boston Trust

0.93

Correlation Coefficient

Virtus Kar  Boston Trust

Almost no diversification

The 3 months correlation between Virtus and Boston is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Mid Cap and Boston Trust Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Midcap and Virtus Kar 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 Kar Mid Cap are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Midcap has no effect on the direction of Virtus Kar i.e., Virtus Kar and Boston Trust go up and down completely randomly.

Pair Corralation between Virtus Kar and Boston Trust

Assuming the 90 days horizon Virtus Kar Mid Cap is expected to under-perform the Boston Trust. In addition to that, Virtus Kar is 1.2 times more volatile than Boston Trust Midcap. It trades about -0.07 of its total potential returns per unit of risk. Boston Trust Midcap is currently generating about -0.03 per unit of volatility. If you would invest  2,434  in Boston Trust Midcap on December 29, 2024 and sell it today you would lose (46.00) from holding Boston Trust Midcap or give up 1.89% of portfolio value over 90 days.

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

Virtus Kar Mid Cap  vs.  Boston Trust Midcap

Virtus Kar Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Kar Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Virtus Kar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Boston Trust Midcap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Trust Midcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Boston Trust 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 Kar and Boston Trust

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

The idea behind Virtus Kar Mid Cap and Boston Trust Midcap 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.