Correlation Between Virtus Dfa and Franklin Government

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

By analyzing existing cross correlation between Virtus Dfa 2040 and Franklin Government Money, you can compare the effects of market volatilities on Virtus Dfa and Franklin Government 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 Dfa with a short position of Franklin Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Dfa and Franklin Government.

Diversification Opportunities for Virtus Dfa and Franklin Government

0.0

Correlation Coefficient

Virtus Dfa  Franklin Government

Pay attention - limited upside

The 3 months correlation between VIRTUS and Franklin is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Dfa 2040 and Franklin Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Government Money and Virtus Dfa 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 Dfa 2040 are associated (or correlated) with Franklin Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Government Money has no effect on the direction of Virtus Dfa i.e., Virtus Dfa and Franklin Government go up and down completely randomly.

Pair Corralation between Virtus Dfa and Franklin Government

Assuming the 90 days horizon Virtus Dfa 2040 is expected to generate 6.6 times more return on investment than Franklin Government. However, Virtus Dfa is 6.6 times more volatile than Franklin Government Money. It trades about 0.03 of its potential returns per unit of risk. Franklin Government Money is currently generating about 0.12 per unit of risk. If you would invest  957.00  in Virtus Dfa 2040 on October 22, 2024 and sell it today you would earn a total of  101.00  from holding Virtus Dfa 2040 or generate 10.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.74%
Values	Daily Returns

Virtus Dfa 2040  vs.  Franklin Government Money

Virtus Dfa 2040

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Virtus Dfa 2040 has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Franklin Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Government Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Franklin Government 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 Dfa and Franklin Government

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

The idea behind Virtus Dfa 2040 and Franklin Government Money 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.