Correlation Between Virtus Multi-sector and High-yield Fund

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

By analyzing existing cross correlation between Virtus Multi Sector Short and High Yield Fund R5, you can compare the effects of market volatilities on Virtus Multi-sector and High-yield Fund 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-sector with a short position of High-yield Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Multi-sector and High-yield Fund.

Diversification Opportunities for Virtus Multi-sector and High-yield Fund

0.81

Correlation Coefficient

Virtus Multi-sector  High-yield Fund

Very poor diversification

The 3 months correlation between Virtus and High-yield is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Multi Sector Short and High Yield Fund R5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund and Virtus Multi-sector 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 Sector Short are associated (or correlated) with High-yield Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Virtus Multi-sector i.e., Virtus Multi-sector and High-yield Fund go up and down completely randomly.

Pair Corralation between Virtus Multi-sector and High-yield Fund

Assuming the 90 days horizon Virtus Multi-sector is expected to generate 1.24 times less return on investment than High-yield Fund. But when comparing it to its historical volatility, Virtus Multi Sector Short is 1.6 times less risky than High-yield Fund. It trades about 0.13 of its potential returns per unit of risk. High Yield Fund R5 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  445.00  in High Yield Fund R5 on October 5, 2024 and sell it today you would earn a total of  64.00  from holding High Yield Fund R5 or generate 14.38% return on investment over 90 days.

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

Virtus Multi Sector Short  vs.  High Yield Fund R5

Virtus Multi Sector

Risk-Adjusted Performance

0 of 100

Very Weak

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

High Yield Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Yield Fund R5 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, High-yield Fund 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-sector and High-yield Fund

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

The idea behind Virtus Multi Sector Short and High Yield Fund R5 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.