Correlation Between Virtus Kar and Vanguard Tax-managed

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

By analyzing existing cross correlation between Virtus Kar Developing and Vanguard Tax Managed Capital, you can compare the effects of market volatilities on Virtus Kar and Vanguard Tax-managed 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 Vanguard Tax-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Kar and Vanguard Tax-managed.

Diversification Opportunities for Virtus Kar and Vanguard Tax-managed

0.45

Correlation Coefficient

Virtus Kar  Vanguard Tax-managed

Very weak diversification

The 3 months correlation between Virtus and Vanguard is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Kar Developing and Vanguard Tax Managed Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Tax Managed 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 Developing are associated (or correlated) with Vanguard Tax-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Tax Managed has no effect on the direction of Virtus Kar i.e., Virtus Kar and Vanguard Tax-managed go up and down completely randomly.

Pair Corralation between Virtus Kar and Vanguard Tax-managed

Assuming the 90 days horizon Virtus Kar is expected to generate 3.0 times less return on investment than Vanguard Tax-managed. But when comparing it to its historical volatility, Virtus Kar Developing is 1.13 times less risky than Vanguard Tax-managed. It trades about 0.08 of its potential returns per unit of risk. Vanguard Tax Managed Capital is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  14,087  in Vanguard Tax Managed Capital on September 3, 2024 and sell it today you would earn a total of  1,423  from holding Vanguard Tax Managed Capital or generate 10.1% return on investment over 90 days.

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

Virtus Kar Developing  vs.  Vanguard Tax Managed Capital

Virtus Kar Developing

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Kar Developing are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Virtus Kar is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Tax Managed

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Tax Managed Capital are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Tax-managed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Virtus Kar and Vanguard Tax-managed

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

The idea behind Virtus Kar Developing and Vanguard Tax Managed Capital 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..