VIRT investors re-evaluating their investment strategy
14 Dec, 201813 min read
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VIRTU FINANCIAL, INC. significantly underperformed today. It fell by -1.32% to close at 25.47. During the last week it fell by -0.97% and saw a maximum drawdown of -1.32% before bouncing back.
VIRT is currently in a bullish trend. The current bullish signal has generated a profit of +11.96% for VIRT's investors in the last three months.
VIRT has been outperforming the SP500 index in recent time. It showed significant outperformance (compared to the SP500 index) from 6 Nov, 2017 to 20 Apr, 2018. Over the last 2 years 11 months and 10 days, VIRT underperformed the SP500 index on 52% days.
During the last three months VIRT was mostly profitable and delivered on average +0.27% per day. It's best return during this period (of +10.17%) was on Thursday, 4 Oct, 2018. While it's worst loss in the same period (of -3.28%) was on Tuesday, 16 Oct, 2018. The longest stort-term trends during this period were 4 profitable and losing days. The bullish trend (which returned +2.51%) started on 17 Sep, 2018 and went on till 20 Sep, 2018 while the bearish trend (which returned -6.18%) started on 21 Sep, 2018 and went on till 26 Sep, 2018.
During the last year VIRT had 8 profitable months and 4 loss making months. Profitable number of months of VIRT and SP500 index were the same. VIRT significantly outperformed SP500 index in Feb 2018, when it returned +55.5% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. VIRT had a shorter streak of profitable months than SP500 index. It only went up in 4 straight months during the last year. It is interesting to note that both VIRT and SP500 index significantly outperform during months when quarterly/annual results are announced.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
-- Ayn Rand
VIRT is currently seeing overall fall in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant fall in VIRT's volatility from 4 Oct, 2018 to 14 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.
Advanced/professional short-term investors should note that VIRT has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.
SP500 index has more chance of extreme outcomes than VIRT. Therefore, SP500 must receive a lower allocation than VIRT in your portfolio. SP500 index usually has shorter drawdown period than VIRT.
Based on your interest in VIRT you may find it interesting to know that AMBC, NWL and ELSE have all performed similar to VIRT and qualify as alternative investment candidates that must be evaluated for diversification.
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