Correlation Between Virtus Kar and Government Street

Can any of the company-specific risk be diversified away by investing in both Virtus Kar and Government Street 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 Government Street 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 Government Street Equity, you can compare the effects of market volatilities on Virtus Kar and Government Street 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 Government Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Kar and Government Street.

Diversification Opportunities for Virtus Kar and Government Street

0.68

Correlation Coefficient

Virtus Kar  Government Street

Poor diversification

The 3 months correlation between Virtus and Government is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Mid Cap and Government Street Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Street Equity 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 Government Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Street Equity has no effect on the direction of Virtus Kar i.e., Virtus Kar and Government Street go up and down completely randomly.

Pair Corralation between Virtus Kar and Government Street

Assuming the 90 days horizon Virtus Kar Mid Cap is expected to under-perform the Government Street. In addition to that, Virtus Kar is 1.05 times more volatile than Government Street Equity. It trades about -0.32 of its total potential returns per unit of risk. Government Street Equity is currently generating about -0.22 per unit of volatility. If you would invest  13,213  in Government Street Equity on October 5, 2024 and sell it today you would lose (521.00) from holding Government Street Equity or give up 3.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Virtus Kar Mid Cap  vs.  Government Street Equity

Virtus Kar Mid

Risk-Adjusted Performance

0 of 100

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.

Government Street Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Government Street Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Government Street 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 Government Street

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

The idea behind Virtus Kar Mid Cap and Government Street Equity 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.