Correlation Between IShares 1 and Virtus Newfleet

Can any of the company-specific risk be diversified away by investing in both IShares 1 and Virtus Newfleet 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 IShares 1 and Virtus Newfleet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares 1 3 Year and Virtus Newfleet ABSMBS, you can compare the effects of market volatilities on IShares 1 and Virtus Newfleet 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 IShares 1 with a short position of Virtus Newfleet. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares 1 and Virtus Newfleet.

Diversification Opportunities for IShares 1 and Virtus Newfleet

-0.32

Correlation Coefficient

IShares 1  Virtus Newfleet

Very good diversification

The 3 months correlation between IShares and Virtus is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding iShares 1 3 Year and Virtus Newfleet ABSMBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Newfleet ABSMBS and IShares 1 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 iShares 1 3 Year are associated (or correlated) with Virtus Newfleet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Newfleet ABSMBS has no effect on the direction of IShares 1 i.e., IShares 1 and Virtus Newfleet go up and down completely randomly.

Pair Corralation between IShares 1 and Virtus Newfleet

Given the investment horizon of 90 days iShares 1 3 Year is expected to under-perform the Virtus Newfleet. In addition to that, IShares 1 is 3.76 times more volatile than Virtus Newfleet ABSMBS. It trades about -0.11 of its total potential returns per unit of risk. Virtus Newfleet ABSMBS is currently generating about 0.19 per unit of volatility. If you would invest  2,395  in Virtus Newfleet ABSMBS on September 2, 2024 and sell it today you would earn a total of  30.00  from holding Virtus Newfleet ABSMBS or generate 1.25% return on investment over 90 days.

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

iShares 1 3 Year  vs.  Virtus Newfleet ABSMBS

iShares 1 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares 1 3 Year has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, IShares 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Virtus Newfleet ABSMBS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Newfleet ABSMBS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Virtus Newfleet is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares 1 and Virtus Newfleet

The main advantage of trading using opposite IShares 1 and Virtus Newfleet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares 1 position performs unexpectedly, Virtus Newfleet 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 Newfleet will offset losses from the drop in Virtus Newfleet's long position.

The idea behind iShares 1 3 Year and Virtus Newfleet ABSMBS 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.