Correlation Between Aquila Tax and Virtus Multi

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

By analyzing existing cross correlation between Aquila Tax Free Trust and Virtus Multi Sector Short, you can compare the effects of market volatilities on Aquila Tax and Virtus Multi 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 Aquila Tax with a short position of Virtus Multi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aquila Tax and Virtus Multi.

Diversification Opportunities for Aquila Tax and Virtus Multi

0.82

Correlation Coefficient

Aquila Tax  Virtus Multi

Very poor diversification

The 3 months correlation between Aquila and Virtus is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aquila Tax Free Trust and Virtus Multi Sector Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Multi Sector and Aquila Tax 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 Aquila Tax Free Trust are associated (or correlated) with Virtus Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Multi Sector has no effect on the direction of Aquila Tax i.e., Aquila Tax and Virtus Multi go up and down completely randomly.

Pair Corralation between Aquila Tax and Virtus Multi

Assuming the 90 days horizon Aquila Tax Free Trust is expected to generate 1.32 times more return on investment than Virtus Multi. However, Aquila Tax is 1.32 times more volatile than Virtus Multi Sector Short. It trades about 0.27 of its potential returns per unit of risk. Virtus Multi Sector Short is currently generating about 0.22 per unit of risk. If you would invest  975.00  in Aquila Tax Free Trust on September 14, 2024 and sell it today you would earn a total of  7.00  from holding Aquila Tax Free Trust or generate 0.72% return on investment over 90 days.

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

Aquila Tax Free Trust  vs.  Virtus Multi Sector Short

Aquila Tax Free

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aquila Tax Free Trust are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Aquila Tax is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Multi Sector

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Multi Sector Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aquila Tax and Virtus Multi

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

The idea behind Aquila Tax Free Trust and Virtus Multi Sector Short 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.