Correlation Between VanEck BDC and Virtus InfraCap

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

By analyzing existing cross correlation between VanEck BDC Income and Virtus InfraCap Preferred, you can compare the effects of market volatilities on VanEck BDC and Virtus InfraCap 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 VanEck BDC with a short position of Virtus InfraCap. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck BDC and Virtus InfraCap.

Diversification Opportunities for VanEck BDC and Virtus InfraCap

0.11

Correlation Coefficient

VanEck BDC  Virtus InfraCap

Average diversification

The 3 months correlation between VanEck and Virtus is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding VanEck BDC Income and Virtus InfraCap Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus InfraCap Preferred and VanEck BDC 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 VanEck BDC Income are associated (or correlated) with Virtus InfraCap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus InfraCap Preferred has no effect on the direction of VanEck BDC i.e., VanEck BDC and Virtus InfraCap go up and down completely randomly.

Pair Corralation between VanEck BDC and Virtus InfraCap

Given the investment horizon of 90 days VanEck BDC Income is expected to generate 1.31 times more return on investment than Virtus InfraCap. However, VanEck BDC is 1.31 times more volatile than Virtus InfraCap Preferred. It trades about 0.05 of its potential returns per unit of risk. Virtus InfraCap Preferred is currently generating about -0.1 per unit of risk. If you would invest  1,648  in VanEck BDC Income on September 22, 2024 and sell it today you would earn a total of  10.00  from holding VanEck BDC Income or generate 0.61% return on investment over 90 days.

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

VanEck BDC Income  vs.  Virtus InfraCap Preferred

VanEck BDC Income

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck BDC Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, VanEck BDC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Virtus InfraCap Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus InfraCap Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Virtus InfraCap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VanEck BDC and Virtus InfraCap

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

The idea behind VanEck BDC Income and Virtus InfraCap Preferred 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.