Correlation Between Virtus Multi-strategy and Nationwide Destination

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

By analyzing existing cross correlation between Virtus Multi Strategy Target and Nationwide Destination 2045, you can compare the effects of market volatilities on Virtus Multi-strategy and Nationwide Destination 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 Multi-strategy with a short position of Nationwide Destination. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Multi-strategy and Nationwide Destination.

Diversification Opportunities for Virtus Multi-strategy and Nationwide Destination

0.69

Correlation Coefficient

Virtus Multi-strategy  Nationwide Destination

Poor diversification

The 3 months correlation between Virtus and Nationwide is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Multi Strategy Target and Nationwide Destination 2045 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide Destination and Virtus Multi-strategy 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 Multi Strategy Target are associated (or correlated) with Nationwide Destination. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide Destination has no effect on the direction of Virtus Multi-strategy i.e., Virtus Multi-strategy and Nationwide Destination go up and down completely randomly.

Pair Corralation between Virtus Multi-strategy and Nationwide Destination

Assuming the 90 days horizon Virtus Multi Strategy Target is expected to generate 0.28 times more return on investment than Nationwide Destination. However, Virtus Multi Strategy Target is 3.63 times less risky than Nationwide Destination. It trades about -0.41 of its potential returns per unit of risk. Nationwide Destination 2045 is currently generating about -0.16 per unit of risk. If you would invest  1,829  in Virtus Multi Strategy Target on October 9, 2024 and sell it today you would lose (29.00) from holding Virtus Multi Strategy Target or give up 1.59% of portfolio value over 90 days.

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

Virtus Multi Strategy Target  vs.  Nationwide Destination 2045

Virtus Multi Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nationwide Destination

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide Destination 2045 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Nationwide Destination 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 Multi-strategy and Nationwide Destination

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

The idea behind Virtus Multi Strategy Target and Nationwide Destination 2045 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.