Correlation Between SPDR SP and Virtus LifeSci
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Virtus LifeSci into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Bank and Virtus LifeSci Biotech, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Virtus LifeSci.
Diversification Opportunities for SPDR SP and Virtus LifeSci
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between SPDR and Virtus is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Bank 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 SPDR SP 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 SPDR SP Bank 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 SPDR SP i.e., SPDR SP and Virtus LifeSci go up and down completely randomly.
Pair Corralation between SPDR SP and Virtus LifeSci
Considering the 90-day investment horizon SPDR SP Bank is expected to generate 1.25 times more return on investment than Virtus LifeSci. However, SPDR SP is 1.25 times more volatile than Virtus LifeSci Biotech. It trades about -0.02 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.32 per unit of risk. If you would invest 4,551 in SPDR SP Bank on January 24, 2024 and sell it today you would lose (34.00) from holding SPDR SP Bank or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
SPDR SP Bank vs. Virtus LifeSci Biotech
Performance |
| Timeline |
| SPDR SP Bank |
| Virtus LifeSci Biotech |
SPDR SP and Virtus LifeSci Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Virtus LifeSci
The main advantage of trading using opposite SPDR SP and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. Virtus InfraCap Preferred | SPDR SP vs. XAI Octagon Floating | SPDR SP vs. Amplify High Income | SPDR SP vs. Triplepoint Venture Growth |
| Virtus LifeSci vs. Virtus LifeSci Biotech | Virtus LifeSci vs. ALPS Medical Breakthroughs | Virtus LifeSci vs. Loncar Cancer Immunotherapy | Virtus LifeSci vs. Principal Healthcare Innovators |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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