Correlation Between Virtus Convertible and Domini Impact

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

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

Diversification Opportunities for Virtus Convertible and Domini Impact

-0.72

Correlation Coefficient

Virtus Convertible  Domini Impact

Pay attention - limited upside

The 3 months correlation between Virtus and Domini is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Convertible and Domini Impact Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Domini Impact Bond and Virtus Convertible 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 Convertible are associated (or correlated) with Domini Impact. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Domini Impact Bond has no effect on the direction of Virtus Convertible i.e., Virtus Convertible and Domini Impact go up and down completely randomly.

Pair Corralation between Virtus Convertible and Domini Impact

Assuming the 90 days horizon Virtus Convertible is expected to generate 1.75 times more return on investment than Domini Impact. However, Virtus Convertible is 1.75 times more volatile than Domini Impact Bond. It trades about 0.37 of its potential returns per unit of risk. Domini Impact Bond is currently generating about -0.09 per unit of risk. If you would invest  3,288  in Virtus Convertible on September 4, 2024 and sell it today you would earn a total of  434.00  from holding Virtus Convertible or generate 13.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Virtus Convertible  vs.  Domini Impact Bond

Virtus Convertible

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Convertible are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Virtus Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Domini Impact Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Domini Impact Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Domini Impact 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 Convertible and Domini Impact

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

The idea behind Virtus Convertible and Domini Impact Bond 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.