Correlation Between Virtus Private and First Trust

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

By analyzing existing cross correlation between Virtus Private Credit and First Trust TCW, you can compare the effects of market volatilities on Virtus Private and First Trust 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 Private with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Private and First Trust.

Diversification Opportunities for Virtus Private and First Trust

0.61

Correlation Coefficient

Virtus Private  First Trust

Poor diversification

The 3 months correlation between Virtus and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Private Credit and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW and Virtus Private 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 Private Credit are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust TCW has no effect on the direction of Virtus Private i.e., Virtus Private and First Trust go up and down completely randomly.

Pair Corralation between Virtus Private and First Trust

Considering the 90-day investment horizon Virtus Private is expected to generate 1.54 times less return on investment than First Trust. In addition to that, Virtus Private is 3.83 times more volatile than First Trust TCW. It trades about 0.07 of its total potential returns per unit of risk. First Trust TCW is currently generating about 0.41 per unit of volatility. If you would invest  2,433  in First Trust TCW on December 11, 2024 and sell it today you would earn a total of  58.00  from holding First Trust TCW or generate 2.38% return on investment over 90 days.

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

Virtus Private Credit  vs.  First Trust TCW

Virtus Private Credit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Private Credit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Virtus Private is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust TCW

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust TCW are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Virtus Private and First Trust

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

The idea behind Virtus Private Credit and First Trust TCW 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.