Correlation Between Virtus Convertible and Gabelli Equity

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

By analyzing existing cross correlation between Virtus Convertible and The Gabelli Equity, you can compare the effects of market volatilities on Virtus Convertible and Gabelli Equity 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 Gabelli Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Convertible and Gabelli Equity.

Diversification Opportunities for Virtus Convertible and Gabelli Equity

0.88

Correlation Coefficient

Virtus Convertible  Gabelli Equity

Very poor diversification

The 3 months correlation between Virtus and Gabelli is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Convertible and The Gabelli Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Equity 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 Gabelli Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Equity has no effect on the direction of Virtus Convertible i.e., Virtus Convertible and Gabelli Equity go up and down completely randomly.

Pair Corralation between Virtus Convertible and Gabelli Equity

Assuming the 90 days horizon Virtus Convertible is expected to generate 0.76 times more return on investment than Gabelli Equity. However, Virtus Convertible is 1.32 times less risky than Gabelli Equity. It trades about 0.37 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.15 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 Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Virtus Convertible  vs.  The Gabelli Equity

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.

Gabelli Equity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Gabelli Equity are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Gabelli Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Virtus Convertible and Gabelli Equity

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

The idea behind Virtus Convertible and The Gabelli Equity 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.