Correlation Between Virtus Dfa and American Beacon

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

Diversification Opportunities for Virtus Dfa and American Beacon

0.85

Correlation Coefficient

Virtus Dfa  American Beacon

Very poor diversification

The 3 months correlation between Virtus and American is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Dfa 2040 and American Beacon Ssi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Ssi 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 American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Ssi has no effect on the direction of Virtus Dfa i.e., Virtus Dfa and American Beacon go up and down completely randomly.

Pair Corralation between Virtus Dfa and American Beacon

Assuming the 90 days horizon Virtus Dfa 2040 is expected to generate 5.46 times more return on investment than American Beacon. However, Virtus Dfa is 5.46 times more volatile than American Beacon Ssi. It trades about 0.19 of its potential returns per unit of risk. American Beacon Ssi is currently generating about 0.47 per unit of risk. If you would invest  1,157  in Virtus Dfa 2040 on September 4, 2024 and sell it today you would earn a total of  68.00  from holding Virtus Dfa 2040 or generate 5.88% return on investment over 90 days.

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

Virtus Dfa 2040  vs.  American Beacon Ssi

Virtus Dfa 2040

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Dfa 2040 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Dfa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Beacon Ssi

Risk-Adjusted Performance

36 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in American Beacon Ssi are ranked lower than 36 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, American Beacon 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 American Beacon

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

The idea behind Virtus Dfa 2040 and American Beacon Ssi 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.