Correlation Between Virtus Global and Western Asset

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

By analyzing existing cross correlation between Virtus Global Multi and Western Asset High, you can compare the effects of market volatilities on Virtus Global and Western Asset 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 Global with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus Global and Western Asset.

Diversification Opportunities for Virtus Global and Western Asset

0.82

Correlation Coefficient

Virtus Global  Western Asset

Very poor diversification

The 3 months correlation between Virtus and Western is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Global Multi and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Virtus Global 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 Global Multi are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Virtus Global i.e., Virtus Global and Western Asset go up and down completely randomly.

Pair Corralation between Virtus Global and Western Asset

Considering the 90-day investment horizon Virtus Global Multi is expected to generate 0.85 times more return on investment than Western Asset. However, Virtus Global Multi is 1.18 times less risky than Western Asset. It trades about 0.18 of its potential returns per unit of risk. Western Asset High is currently generating about 0.03 per unit of risk. If you would invest  754.00  in Virtus Global Multi on August 17, 2024 and sell it today you would earn a total of  40.00  from holding Virtus Global Multi or generate 5.31% return on investment over 90 days.

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

Virtus Global Multi  vs.  Western Asset High

Virtus Global Multi

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Global Multi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Virtus Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Western Asset High

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Virtus Global and Western Asset

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

The idea behind Virtus Global Multi and Western Asset High 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.