Correlation Between VanEck Biotech and Technology Select
Can any of the company-specific risk be diversified away by investing in both VanEck Biotech and Technology Select 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 Technology Select 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 Technology Select Sector, you can compare the effects of market volatilities on VanEck Biotech and Technology Select 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 Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Biotech and Technology Select.
Diversification Opportunities for VanEck Biotech and Technology Select
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between VanEck and Technology is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Biotech ETF and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector 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 Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of VanEck Biotech i.e., VanEck Biotech and Technology Select go up and down completely randomly.
Pair Corralation between VanEck Biotech and Technology Select
Considering the 90-day investment horizon VanEck Biotech ETF is expected to under-perform the Technology Select. But the etf apears to be less risky and, when comparing its historical volatility, VanEck Biotech ETF is 1.13 times less risky than Technology Select. The etf trades about -0.02 of its potential returns per unit of risk. The Technology Select Sector is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 13,289 in Technology Select Sector on January 19, 2024 and sell it today you would earn a total of 6,591 from holding Technology Select Sector or generate 49.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.68% |
| Values | Daily Returns |
VanEck Biotech ETF vs. Technology Select Sector
Performance |
| Timeline |
| VanEck Biotech ETF |
| Technology Select Sector |
VanEck Biotech and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Biotech and Technology Select
The main advantage of trading using opposite VanEck Biotech and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Biotech position performs unexpectedly, Technology Select 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 Technology Select will offset losses from the drop in Technology Select's long position.| VanEck Biotech vs. VanEck Pharmaceutical ETF | VanEck Biotech vs. VanEck Retail ETF | VanEck Biotech vs. First Trust NYSE | VanEck Biotech vs. Invesco Dynamic Biotechnology |
| Technology Select vs. ARK Genomic Revolution | Technology Select vs. ARK Innovation ETF | Technology Select vs. ARK Space Exploration |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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