Correlation Between IShares MSCI and Virtus LifeSci
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 MSCI 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 MSCI USA and Virtus LifeSci Biotech, you can compare the effects of market volatilities on IShares MSCI 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 MSCI with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Virtus LifeSci.
Diversification Opportunities for IShares MSCI and Virtus LifeSci
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and Virtus is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA 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 MSCI 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 MSCI USA 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 MSCI i.e., IShares MSCI and Virtus LifeSci go up and down completely randomly.
Pair Corralation between IShares MSCI and Virtus LifeSci
Given the investment horizon of 90 days iShares MSCI USA is expected to generate 0.39 times more return on investment than Virtus LifeSci. However, iShares MSCI USA is 2.6 times less risky than Virtus LifeSci. It trades about -0.25 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.33 per unit of risk. If you would invest 8,338 in iShares MSCI USA on January 27, 2024 and sell it today you would lose (216.00) from holding iShares MSCI USA or give up 2.59% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
iShares MSCI USA vs. Virtus LifeSci Biotech
Performance |
Timeline |
iShares MSCI USA |
Virtus LifeSci Biotech |
IShares MSCI and Virtus LifeSci Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares MSCI and Virtus LifeSci
The main advantage of trading using opposite IShares MSCI and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.IShares MSCI vs. Vanguard Mid Cap Index | IShares MSCI vs. Vanguard Small Cap Index | IShares MSCI vs. Vanguard Extended Market | IShares MSCI vs. Vanguard Small Cap Growth |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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