Correlation Between Cambiar Small and Virtus Emerging

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

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

Diversification Opportunities for Cambiar Small and Virtus Emerging

0.27

Correlation Coefficient

Cambiar Small  Virtus Emerging

Modest diversification

The 3 months correlation between Cambiar and Virtus is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cambiar Small Cap 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 Cambiar Small 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 Cambiar Small Cap 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 Cambiar Small i.e., Cambiar Small and Virtus Emerging go up and down completely randomly.

Pair Corralation between Cambiar Small and Virtus Emerging

Assuming the 90 days horizon Cambiar Small Cap is expected to generate 0.94 times more return on investment than Virtus Emerging. However, Cambiar Small Cap is 1.06 times less risky than Virtus Emerging. It trades about 0.0 of its potential returns per unit of risk. Virtus Emerging Markets is currently generating about -0.08 per unit of risk. If you would invest  1,526  in Cambiar Small Cap on February 1, 2024 and sell it today you would lose (4.00) from holding Cambiar Small Cap or give up 0.26% of portfolio value over 90 days.

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

Cambiar Small Cap  vs.  Virtus Emerging Markets

Cambiar Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambiar Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Cambiar Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Virtus Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary 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 Cambiar Small and Virtus Emerging

The main advantage of trading using opposite Cambiar Small and Virtus Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambiar Small 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 Cambiar Small Cap 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.