Correlation Between Virtus Kar and Virtus Westchester

Can any of the company-specific risk be diversified away by investing in both Virtus Kar and Virtus Westchester 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 Virtus Westchester 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 Virtus Westchester Credit, you can compare the effects of market volatilities on Virtus Kar and Virtus Westchester 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 Virtus Westchester. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Kar and Virtus Westchester.

Diversification Opportunities for Virtus Kar and Virtus Westchester

0.93

Correlation Coefficient

Virtus Kar  Virtus Westchester

Almost no diversification

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

Pair Corralation between Virtus Kar and Virtus Westchester

Assuming the 90 days horizon Virtus Kar Small Cap is expected to generate 15.07 times more return on investment than Virtus Westchester. However, Virtus Kar is 15.07 times more volatile than Virtus Westchester Credit. It trades about 0.07 of its potential returns per unit of risk. Virtus Westchester Credit is currently generating about 0.39 per unit of risk. If you would invest  3,321  in Virtus Kar Small Cap on September 4, 2024 and sell it today you would earn a total of  668.00  from holding Virtus Kar Small Cap or generate 20.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.6%
Values	Daily Returns

Virtus Kar Small Cap  vs.  Virtus Westchester Credit

Virtus Kar Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Small Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Virtus Kar showed solid returns over the last few months and may actually be approaching a breakup point.

Virtus Westchester Credit

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Westchester Credit are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Westchester 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 Virtus Westchester

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

The idea behind Virtus Kar Small Cap and Virtus Westchester Credit 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.