Correlation Between IShares Medical and VanEck Pharmaceutical

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

By analyzing existing cross correlation between iShares Medical Devices and VanEck Pharmaceutical ETF, you can compare the effects of market volatilities on IShares Medical and VanEck Pharmaceutical 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 Medical with a short position of VanEck Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Medical and VanEck Pharmaceutical.

Diversification Opportunities for IShares Medical and VanEck Pharmaceutical

0.7

Correlation Coefficient

IShares Medical  VanEck Pharmaceutical

Poor diversification

The 3 months correlation between IShares and VanEck is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding iShares Medical Devices and VanEck Pharmaceutical ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Pharmaceutical ETF and IShares Medical 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 Medical Devices are associated (or correlated) with VanEck Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Pharmaceutical ETF has no effect on the direction of IShares Medical i.e., IShares Medical and VanEck Pharmaceutical go up and down completely randomly.

Pair Corralation between IShares Medical and VanEck Pharmaceutical

Considering the 90-day investment horizon iShares Medical Devices is expected to under-perform the VanEck Pharmaceutical. In addition to that, IShares Medical is 1.52 times more volatile than VanEck Pharmaceutical ETF. It trades about -0.01 of its total potential returns per unit of risk. VanEck Pharmaceutical ETF is currently generating about 0.06 per unit of volatility. If you would invest  8,842  in VanEck Pharmaceutical ETF on February 18, 2024 and sell it today you would earn a total of  181.00  from holding VanEck Pharmaceutical ETF or generate 2.05% return on investment over 90 days.

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

iShares Medical Devices  vs.  VanEck Pharmaceutical ETF

iShares Medical Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Medical Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, IShares Medical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

VanEck Pharmaceutical ETF

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Pharmaceutical ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, VanEck Pharmaceutical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares Medical and VanEck Pharmaceutical

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

The idea behind iShares Medical Devices and VanEck Pharmaceutical ETF 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.