Correlation Between IShares Expanded and Virtus LifeSci

Can any of the company-specific risk be diversified away by investing in both IShares Expanded and Virtus LifeSci 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 IShares Expanded and Virtus LifeSci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Expanded Tech Software and Virtus LifeSci Biotech, you can compare the effects of market volatilities on IShares Expanded and Virtus LifeSci 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 IShares Expanded with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Expanded and Virtus LifeSci.

Diversification Opportunities for IShares Expanded and Virtus LifeSci

0.67

Correlation Coefficient

IShares Expanded  Virtus LifeSci

Poor diversification

The 3 months correlation between IShares and Virtus is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Expanded Tech Software and Virtus LifeSci Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus LifeSci Biotech and IShares Expanded 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 iShares Expanded Tech Software are associated (or correlated) with Virtus LifeSci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus LifeSci Biotech has no effect on the direction of IShares Expanded i.e., IShares Expanded and Virtus LifeSci go up and down completely randomly.

Pair Corralation between IShares Expanded and Virtus LifeSci

Considering the 90-day investment horizon iShares Expanded Tech Software is expected to generate 0.86 times more return on investment than Virtus LifeSci. However, iShares Expanded Tech Software is 1.16 times less risky than Virtus LifeSci. It trades about -0.02 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.11 per unit of risk. If you would invest  8,550  in iShares Expanded Tech Software on February 26, 2024 and sell it today you would lose (178.00) from holding iShares Expanded Tech Software or give up 2.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

iShares Expanded Tech Software  vs.  Virtus LifeSci Biotech

iShares Expanded Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Expanded Tech Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, IShares Expanded is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Virtus LifeSci Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus LifeSci Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Etf's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with IShares Expanded and Virtus LifeSci

The main advantage of trading using opposite IShares Expanded and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Expanded position performs unexpectedly, Virtus LifeSci 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 Virtus LifeSci will offset losses from the drop in Virtus LifeSci's long position.

The idea behind iShares Expanded Tech Software and Virtus LifeSci Biotech 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.