Correlation Between Virtus Kar and Simt Large

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

By analyzing existing cross correlation between Virtus Kar Small Cap and Simt Large Cap, you can compare the effects of market volatilities on Virtus Kar and Simt Large 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 Kar with a short position of Simt Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Kar and Simt Large.

Diversification Opportunities for Virtus Kar and Simt Large

0.9

Correlation Coefficient

Virtus Kar  Simt Large

Almost no diversification

The 3 months correlation between Virtus and Simt is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Small Cap and Simt Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Large Cap and Virtus Kar 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 Kar Small Cap are associated (or correlated) with Simt Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Large Cap has no effect on the direction of Virtus Kar i.e., Virtus Kar and Simt Large go up and down completely randomly.

Pair Corralation between Virtus Kar and Simt Large

Assuming the 90 days horizon Virtus Kar Small Cap is expected to generate 1.49 times more return on investment than Simt Large. However, Virtus Kar is 1.49 times more volatile than Simt Large Cap. It trades about 0.11 of its potential returns per unit of risk. Simt Large Cap is currently generating about 0.07 per unit of risk. If you would invest  3,922  in Virtus Kar Small Cap on September 16, 2024 and sell it today you would earn a total of  285.00  from holding Virtus Kar Small Cap or generate 7.27% return on investment over 90 days.

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

Virtus Kar Small Cap  vs.  Simt Large Cap

Virtus Kar Small

Risk-Adjusted Performance

8 of 100

OK

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

Simt Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Virtus Kar and Simt Large

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

The idea behind Virtus Kar Small Cap and Simt Large Cap 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.