Correlation Between Virtus WMC and Xtrackers MSCI

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

By analyzing existing cross correlation between Virtus WMC International and Xtrackers MSCI EAFE, you can compare the effects of market volatilities on Virtus WMC and Xtrackers MSCI 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 WMC with a short position of Xtrackers MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus WMC and Xtrackers MSCI.

Diversification Opportunities for Virtus WMC and Xtrackers MSCI

0.99

Correlation Coefficient

Virtus WMC  Xtrackers MSCI

No risk reduction

The 3 months correlation between Virtus and Xtrackers is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Virtus WMC International and Xtrackers MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI EAFE and Virtus WMC 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 WMC International are associated (or correlated) with Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI EAFE has no effect on the direction of Virtus WMC i.e., Virtus WMC and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Virtus WMC and Xtrackers MSCI

Given the investment horizon of 90 days Virtus WMC International is expected to generate 0.87 times more return on investment than Xtrackers MSCI. However, Virtus WMC International is 1.15 times less risky than Xtrackers MSCI. It trades about -0.11 of its potential returns per unit of risk. Xtrackers MSCI EAFE is currently generating about -0.12 per unit of risk. If you would invest  2,880  in Virtus WMC International on September 15, 2024 and sell it today you would lose (137.00) from holding Virtus WMC International or give up 4.76% of portfolio value over 90 days.

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

Virtus WMC International  vs.  Xtrackers MSCI EAFE

Virtus WMC International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus WMC International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Virtus WMC is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Xtrackers MSCI EAFE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xtrackers MSCI EAFE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Xtrackers MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Virtus WMC and Xtrackers MSCI

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

The idea behind Virtus WMC International and Xtrackers MSCI EAFE 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.