Correlation Between American Funds and Virtus Dividend

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

By analyzing existing cross correlation between American Funds Retirement and Virtus Dividend Interest, you can compare the effects of market volatilities on American Funds and Virtus Dividend 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 American Funds with a short position of Virtus Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Virtus Dividend.

Diversification Opportunities for American Funds and Virtus Dividend

0.79

Correlation Coefficient

American Funds  Virtus Dividend

Poor diversification

The 3 months correlation between American and Virtus is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Virtus Dividend Interest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Dividend Interest and American Funds 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 American Funds Retirement are associated (or correlated) with Virtus Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Dividend Interest has no effect on the direction of American Funds i.e., American Funds and Virtus Dividend go up and down completely randomly.

Pair Corralation between American Funds and Virtus Dividend

Assuming the 90 days horizon American Funds Retirement is expected to generate 0.57 times more return on investment than Virtus Dividend. However, American Funds Retirement is 1.74 times less risky than Virtus Dividend. It trades about 0.04 of its potential returns per unit of risk. Virtus Dividend Interest is currently generating about -0.05 per unit of risk. If you would invest  1,401  in American Funds Retirement on September 19, 2024 and sell it today you would earn a total of  13.00  from holding American Funds Retirement or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

American Funds Retirement  vs.  Virtus Dividend Interest

American Funds Retirement

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Retirement are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Dividend Interest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Dividend Interest has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively steady technical and fundamental indicators, Virtus Dividend is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with American Funds and Virtus Dividend

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

The idea behind American Funds Retirement and Virtus Dividend Interest 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.