Correlation Between VanEck Biotech and IShares US

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

Diversification Opportunities for VanEck Biotech and IShares US

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between VanEck and IShares is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Biotech ETF and IShares US Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares US Medical and VanEck Biotech 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 VanEck Biotech ETF are associated (or correlated) with IShares US. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares US Medical has no effect on the direction of VanEck Biotech i.e., VanEck Biotech and IShares US go up and down completely randomly.

Pair Corralation between VanEck Biotech and IShares US

Considering the 90-day investment horizon VanEck Biotech is expected to generate 7.35 times less return on investment than IShares US. But when comparing it to its historical volatility, VanEck Biotech ETF is 1.05 times less risky than IShares US. It trades about 0.01 of its potential returns per unit of risk. IShares US Medical is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,746  in IShares US Medical on December 29, 2023 and sell it today you would earn a total of  105.00  from holding IShares US Medical or generate 1.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

VanEck Biotech ETF  vs.  IShares US Medical

 Performance 
       Timeline  
VanEck Biotech ETF 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Biotech ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, VanEck Biotech is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.
IShares US Medical 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in IShares US Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, IShares US may actually be approaching a critical reversion point that can send shares even higher in April 2024.

VanEck Biotech and IShares US Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with VanEck Biotech and IShares US

The main advantage of trading using opposite VanEck Biotech and IShares US positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Biotech position performs unexpectedly, IShares US 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 IShares US will offset losses from the drop in IShares US's long position.
The idea behind VanEck Biotech ETF and IShares US Medical 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.

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