Correlation Between Virtus Dfa and Aberdeen Gbl

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

Diversification Opportunities for Virtus Dfa and Aberdeen Gbl

0.73

Correlation Coefficient

Virtus Dfa  Aberdeen Gbl

Poor diversification

The 3 months correlation between Virtus and Aberdeen is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Dfa 2040 and Aberdeen Gbl Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Gbl Small 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 Aberdeen Gbl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Gbl Small has no effect on the direction of Virtus Dfa i.e., Virtus Dfa and Aberdeen Gbl go up and down completely randomly.

Pair Corralation between Virtus Dfa and Aberdeen Gbl

Assuming the 90 days horizon Virtus Dfa 2040 is expected to under-perform the Aberdeen Gbl. But the mutual fund apears to be less risky and, when comparing its historical volatility, Virtus Dfa 2040 is 1.58 times less risky than Aberdeen Gbl. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Aberdeen Gbl Small is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,703  in Aberdeen Gbl Small on December 30, 2024 and sell it today you would earn a total of  26.00  from holding Aberdeen Gbl Small or generate 0.96% return on investment over 90 days.

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

Virtus Dfa 2040  vs.  Aberdeen Gbl Small

Virtus Dfa 2040

Risk-Adjusted Performance

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 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.

Aberdeen Gbl Small

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen Gbl Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aberdeen Gbl 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 Aberdeen Gbl

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

The idea behind Virtus Dfa 2040 and Aberdeen Gbl 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.