Correlation Between Virtus Multi and Federated Clover

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

Diversification Opportunities for Virtus Multi and Federated Clover

0.33

Correlation Coefficient

Virtus Multi  Federated Clover

Weak diversification

The 3 months correlation between Virtus and Federated is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Multi Sector Short and Federated Clover Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Clover Small 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 Sector Short are associated (or correlated) with Federated Clover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Clover Small has no effect on the direction of Virtus Multi i.e., Virtus Multi and Federated Clover go up and down completely randomly.

Pair Corralation between Virtus Multi and Federated Clover

Assuming the 90 days horizon Virtus Multi is expected to generate 2.96 times less return on investment than Federated Clover. But when comparing it to its historical volatility, Virtus Multi Sector Short is 7.41 times less risky than Federated Clover. It trades about 0.16 of its potential returns per unit of risk. Federated Clover Small is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,397  in Federated Clover Small on September 13, 2024 and sell it today you would earn a total of  451.00  from holding Federated Clover Small or generate 18.82% return on investment over 90 days.

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

Virtus Multi Sector Short  vs.  Federated Clover Small

Virtus Multi Sector

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Multi Sector Short are ranked lower than 2 (%) 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.

Federated Clover Small

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Federated Clover Small are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Federated Clover may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Virtus Multi and Federated Clover

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

The idea behind Virtus Multi Sector Short and Federated Clover Small 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.