Correlation Between Virtus LifeSci and IShares Biotechnology
Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci and IShares Biotechnology 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 IShares Biotechnology 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 iShares Biotechnology ETF, you can compare the effects of market volatilities on Virtus LifeSci and IShares Biotechnology 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 IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and IShares Biotechnology.
Diversification Opportunities for Virtus LifeSci and IShares Biotechnology
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Virtus and IShares is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and iShares Biotechnology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Biotechnology ETF 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 IShares Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Biotechnology ETF has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and IShares Biotechnology go up and down completely randomly.
Pair Corralation between Virtus LifeSci and IShares Biotechnology
Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to generate 1.27 times more return on investment than IShares Biotechnology. However, Virtus LifeSci is 1.27 times more volatile than iShares Biotechnology ETF. It trades about 0.04 of its potential returns per unit of risk. iShares Biotechnology ETF is currently generating about 0.02 per unit of risk. If you would invest 4,000 in Virtus LifeSci Biotech on January 17, 2024 and sell it today you would earn a total of 1,238 from holding Virtus LifeSci Biotech or generate 30.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Virtus LifeSci Biotech vs. iShares Biotechnology ETF
Performance |
| Timeline |
| Virtus LifeSci Biotech |
| iShares Biotechnology ETF |
Virtus LifeSci and IShares Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Virtus LifeSci and IShares Biotechnology
The main advantage of trading using opposite Virtus LifeSci and IShares Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci position performs unexpectedly, IShares Biotechnology 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 Biotechnology will offset losses from the drop in IShares Biotechnology's long position.| Virtus LifeSci vs. Virtus LifeSci Biotech | Virtus LifeSci vs. ALPS Medical Breakthroughs | Virtus LifeSci vs. Loncar Cancer Immunotherapy | Virtus LifeSci vs. Principal Healthcare Innovators |
| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care | IShares Biotechnology vs. American Beacon GLG |
Check out your portfolio center.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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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