Correlation Between Virtus LifeSci and 3M

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Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci and 3M 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 3M 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 3M Company, you can compare the effects of market volatilities on Virtus LifeSci and 3M 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 3M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and 3M.

Diversification Opportunities for Virtus LifeSci and 3M

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Virtus and 3M is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and 3M Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3M Company 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 3M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3M Company has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and 3M go up and down completely randomly.

Pair Corralation between Virtus LifeSci and 3M

Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to under-perform the 3M. In addition to that, Virtus LifeSci is 1.01 times more volatile than 3M Company. It trades about -0.13 of its total potential returns per unit of risk. 3M Company is currently generating about 0.33 per unit of volatility. If you would invest  9,230  in 3M Company on December 29, 2023 and sell it today you would earn a total of  1,377  from holding 3M Company or generate 14.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Virtus LifeSci Biotech  vs.  3M Company

 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.
3M Company 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days 3M Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, 3M is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Virtus LifeSci and 3M Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Virtus LifeSci and 3M

The main advantage of trading using opposite Virtus LifeSci and 3M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci position performs unexpectedly, 3M 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 3M will offset losses from the drop in 3M's long position.
The idea behind Virtus LifeSci Biotech and 3M Company 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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