Correlation Between Nicholas and Virtus High

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

By analyzing existing cross correlation between Nicholas Ltd Edition and Virtus High Yield, you can compare the effects of market volatilities on Nicholas and Virtus High 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 Nicholas with a short position of Virtus High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nicholas and Virtus High.

Diversification Opportunities for Nicholas and Virtus High

0.83

Correlation Coefficient

Nicholas  Virtus High

Very poor diversification

The 3 months correlation between Nicholas and Virtus is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nicholas Ltd Edition and Virtus High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus High Yield and Nicholas 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 Nicholas Ltd Edition are associated (or correlated) with Virtus High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus High Yield has no effect on the direction of Nicholas i.e., Nicholas and Virtus High go up and down completely randomly.

Pair Corralation between Nicholas and Virtus High

Assuming the 90 days horizon Nicholas Ltd Edition is expected to generate 5.74 times more return on investment than Virtus High. However, Nicholas is 5.74 times more volatile than Virtus High Yield. It trades about 0.1 of its potential returns per unit of risk. Virtus High Yield is currently generating about 0.09 per unit of risk. If you would invest  3,017  in Nicholas Ltd Edition on September 16, 2024 and sell it today you would earn a total of  201.00  from holding Nicholas Ltd Edition or generate 6.66% return on investment over 90 days.

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

Nicholas Ltd Edition  vs.  Virtus High Yield

Nicholas Edition

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nicholas Ltd Edition are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Nicholas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Virtus High Yield

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus High Yield are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Virtus High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nicholas and Virtus High

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

The idea behind Nicholas Ltd Edition and Virtus High Yield 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.