Correlation Between Virtus Dividend and First Trust

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

By analyzing existing cross correlation between Virtus Dividend Interest and First Trust Senior, you can compare the effects of market volatilities on Virtus Dividend and First Trust 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 Dividend with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Dividend and First Trust.

Diversification Opportunities for Virtus Dividend and First Trust

0.93

Correlation Coefficient

Virtus Dividend  First Trust

Almost no diversification

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

Pair Corralation between Virtus Dividend and First Trust

Considering the 90-day investment horizon Virtus Dividend Interest is expected to under-perform the First Trust. In addition to that, Virtus Dividend is 1.37 times more volatile than First Trust Senior. It trades about -0.02 of its total potential returns per unit of risk. First Trust Senior is currently generating about -0.01 per unit of volatility. If you would invest  1,006  in First Trust Senior on March 1, 2025 and sell it today you would lose (15.00) from holding First Trust Senior or give up 1.49% of portfolio value over 90 days.

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

Virtus Dividend Interest  vs.  First Trust Senior

Virtus Dividend Interest

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus Dividend Interest has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively steady technical and fundamental indicators, Virtus Dividend is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

First Trust Senior

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust Senior has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, First Trust is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Virtus Dividend and First Trust

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

The idea behind Virtus Dividend Interest and First Trust Senior 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.