Correlation Between Virtus Multi and Dow 2x

Can any of the company-specific risk be diversified away by investing in both Virtus Multi and Dow 2x 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 and Dow 2x 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 Dow 2x Strategy, you can compare the effects of market volatilities on Virtus Multi and Dow 2x 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 with a short position of Dow 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Multi and Dow 2x.

Diversification Opportunities for Virtus Multi and Dow 2x

0.65

Correlation Coefficient

Virtus Multi  Dow 2x

Poor diversification

The 3 months correlation between Virtus and Dow is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Multi Strategy Target and Dow 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow 2x Strategy and Virtus Multi 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 Dow 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow 2x Strategy has no effect on the direction of Virtus Multi i.e., Virtus Multi and Dow 2x go up and down completely randomly.

Pair Corralation between Virtus Multi and Dow 2x

Assuming the 90 days horizon Virtus Multi is expected to generate 4.02 times less return on investment than Dow 2x. But when comparing it to its historical volatility, Virtus Multi Strategy Target is 7.24 times less risky than Dow 2x. It trades about 0.22 of its potential returns per unit of risk. Dow 2x Strategy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  17,376  in Dow 2x Strategy on October 25, 2024 and sell it today you would earn a total of  594.00  from holding Dow 2x Strategy or generate 3.42% return on investment over 90 days.

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

Virtus Multi Strategy Target  vs.  Dow 2x Strategy

Virtus Multi Strategy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Multi Strategy Target are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dow 2x Strategy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dow 2x Strategy are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dow 2x may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Virtus Multi and Dow 2x

The main advantage of trading using opposite Virtus Multi and Dow 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Multi position performs unexpectedly, Dow 2x 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 Dow 2x will offset losses from the drop in Dow 2x's long position.

The idea behind Virtus Multi Strategy Target and Dow 2x Strategy 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.