Correlation Between Virtus Kar and Virtus Tax-exempt

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

By analyzing existing cross correlation between Virtus Kar Small Cap and Virtus Tax Exempt Bond, you can compare the effects of market volatilities on Virtus Kar and Virtus Tax-exempt 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 Kar with a short position of Virtus Tax-exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Kar and Virtus Tax-exempt.

Diversification Opportunities for Virtus Kar and Virtus Tax-exempt

-0.19

Correlation Coefficient

Virtus Kar  Virtus Tax-exempt

Good diversification

The 3 months correlation between Virtus and Virtus is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Small Cap and Virtus Tax Exempt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Tax Exempt and Virtus Kar 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 Kar Small Cap are associated (or correlated) with Virtus Tax-exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Tax Exempt has no effect on the direction of Virtus Kar i.e., Virtus Kar and Virtus Tax-exempt go up and down completely randomly.

Pair Corralation between Virtus Kar and Virtus Tax-exempt

Assuming the 90 days horizon Virtus Kar Small Cap is expected to under-perform the Virtus Tax-exempt. In addition to that, Virtus Kar is 5.6 times more volatile than Virtus Tax Exempt Bond. It trades about -0.14 of its total potential returns per unit of risk. Virtus Tax Exempt Bond is currently generating about -0.05 per unit of volatility. If you would invest  1,014  in Virtus Tax Exempt Bond on December 29, 2024 and sell it today you would lose (6.00) from holding Virtus Tax Exempt Bond or give up 0.59% of portfolio value over 90 days.

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

Virtus Kar Small Cap  vs.  Virtus Tax Exempt Bond

Virtus Kar Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Kar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Virtus Tax Exempt

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Tax Exempt Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Virtus Tax-exempt 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 Kar and Virtus Tax-exempt

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

The idea behind Virtus Kar Small Cap and Virtus Tax Exempt Bond 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.