Correlation Between Virtus Global and Virtus Emerging

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

By analyzing existing cross correlation between Virtus Global Infrastructure and Virtus Emerging Markets, you can compare the effects of market volatilities on Virtus Global and Virtus Emerging 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 Virtus Global with a short position of Virtus Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Global and Virtus Emerging.

Diversification Opportunities for Virtus Global and Virtus Emerging

0.68

Correlation Coefficient

Virtus Global  Virtus Emerging

Poor diversification

The 3 months correlation between Virtus and Virtus is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Global Infrastructure and Virtus Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Emerging Markets and Virtus Global 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 Virtus Global Infrastructure are associated (or correlated) with Virtus Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Emerging Markets has no effect on the direction of Virtus Global i.e., Virtus Global and Virtus Emerging go up and down completely randomly.

Pair Corralation between Virtus Global and Virtus Emerging

Assuming the 90 days horizon Virtus Global Infrastructure is expected to generate 1.23 times more return on investment than Virtus Emerging. However, Virtus Global is 1.23 times more volatile than Virtus Emerging Markets. It trades about -0.15 of its potential returns per unit of risk. Virtus Emerging Markets is currently generating about -0.23 per unit of risk. If you would invest  1,538  in Virtus Global Infrastructure on October 1, 2024 and sell it today you would lose (125.00) from holding Virtus Global Infrastructure or give up 8.13% of portfolio value over 90 days.

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

Virtus Global Infrastructure  vs.  Virtus Emerging Markets

Virtus Global Infras

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Global Infrastructure has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Virtus Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Virtus Global and Virtus Emerging

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

The idea behind Virtus Global Infrastructure and Virtus Emerging Markets 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.