Correlation Between Virtus LifeSci and Franklin FTSE

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Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci and Franklin FTSE 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 LifeSci and Franklin FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virtus LifeSci Biotech and Franklin FTSE Taiwan, you can compare the effects of market volatilities on Virtus LifeSci and Franklin FTSE 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 LifeSci with a short position of Franklin FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and Franklin FTSE.

Diversification Opportunities for Virtus LifeSci and Franklin FTSE

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Virtus and Franklin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and Franklin FTSE Taiwan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin FTSE Taiwan and Virtus LifeSci 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 LifeSci Biotech are associated (or correlated) with Franklin FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin FTSE Taiwan has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and Franklin FTSE go up and down completely randomly.

Pair Corralation between Virtus LifeSci and Franklin FTSE

Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to under-perform the Franklin FTSE. In addition to that, Virtus LifeSci is 2.24 times more volatile than Franklin FTSE Taiwan. It trades about -0.15 of its total potential returns per unit of risk. Franklin FTSE Taiwan is currently generating about 0.29 per unit of volatility. If you would invest  4,126  in Franklin FTSE Taiwan on December 29, 2023 and sell it today you would earn a total of  238.00  from holding Franklin FTSE Taiwan or generate 5.77% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.65%
ValuesDaily Returns

Virtus LifeSci Biotech  vs.  Franklin FTSE Taiwan

 Performance 
       Timeline  
Virtus LifeSci Biotech 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Virtus LifeSci Biotech are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Virtus LifeSci exhibited solid returns over the last few months and may actually be approaching a breakup point.
Franklin FTSE Taiwan 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Franklin FTSE Taiwan are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Franklin FTSE is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Virtus LifeSci and Franklin FTSE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Virtus LifeSci and Franklin FTSE

The main advantage of trading using opposite Virtus LifeSci and Franklin FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci position performs unexpectedly, Franklin FTSE 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 Franklin FTSE will offset losses from the drop in Franklin FTSE's long position.
The idea behind Virtus LifeSci Biotech and Franklin FTSE Taiwan 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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