Correlation Between Small Midcap and Virtus Select

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

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

Diversification Opportunities for Small Midcap and Virtus Select

0.93

Correlation Coefficient

Small Midcap  Virtus Select

Almost no diversification

The 3 months correlation between Small and Virtus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Small Midcap Dividend Income and Virtus Select Mlp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Select Mlp and Small Midcap 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 Small Midcap Dividend Income are associated (or correlated) with Virtus Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Select Mlp has no effect on the direction of Small Midcap i.e., Small Midcap and Virtus Select go up and down completely randomly.

Pair Corralation between Small Midcap and Virtus Select

Assuming the 90 days horizon Small Midcap is expected to generate 1.41 times less return on investment than Virtus Select. In addition to that, Small Midcap is 1.04 times more volatile than Virtus Select Mlp. It trades about 0.16 of its total potential returns per unit of risk. Virtus Select Mlp is currently generating about 0.23 per unit of volatility. If you would invest  1,464  in Virtus Select Mlp on September 12, 2024 and sell it today you would earn a total of  205.00  from holding Virtus Select Mlp or generate 14.0% return on investment over 90 days.

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

Small Midcap Dividend Income  vs.  Virtus Select Mlp

Small Midcap Dividend

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Midcap Dividend Income are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small Midcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Virtus Select Mlp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Select Mlp are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Virtus Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Midcap and Virtus Select

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

The idea behind Small Midcap Dividend Income and Virtus Select Mlp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.