Correlation Between Vanguard Emerging and Virtus Emerging

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

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

Diversification Opportunities for Vanguard Emerging and Virtus Emerging

0.73

Correlation Coefficient

Vanguard Emerging  Virtus Emerging

Poor diversification

The 3 months correlation between Vanguard and Virtus is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Virtus Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Emerging Markets and Vanguard Emerging 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 Vanguard Emerging Markets are associated (or correlated) with Virtus Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Emerging Markets has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Virtus Emerging go up and down completely randomly.

Pair Corralation between Vanguard Emerging and Virtus Emerging

Assuming the 90 days horizon Vanguard Emerging Markets is expected to generate 0.99 times more return on investment than Virtus Emerging. However, Vanguard Emerging Markets is 1.01 times less risky than Virtus Emerging. It trades about 0.16 of its potential returns per unit of risk. Virtus Emerging Markets is currently generating about -0.01 per unit of risk. If you would invest  2,668  in Vanguard Emerging Markets on February 4, 2024 and sell it today you would earn a total of  78.00  from holding Vanguard Emerging Markets or generate 2.92% return on investment over 90 days.

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

Vanguard Emerging Markets  vs.  Virtus Emerging Markets

Vanguard Emerging Markets

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Emerging Markets 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 Emerging may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Virtus Emerging Markets

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Emerging Markets are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Virtus Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Emerging and Virtus Emerging

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

The idea behind Vanguard Emerging Markets and Virtus Emerging Markets 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.