Correlation Between Industrial Select and Virtus LifeSci
Can any of the company-specific risk be diversified away by investing in both Industrial Select 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 Industrial Select and Virtus LifeSci into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Select Sector and Virtus LifeSci Biotech, you can compare the effects of market volatilities on Industrial Select 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 Industrial Select with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and Virtus LifeSci.
Diversification Opportunities for Industrial Select and Virtus LifeSci
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Industrial and Virtus is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector 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 Industrial Select 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 Industrial Select Sector 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 Industrial Select i.e., Industrial Select and Virtus LifeSci go up and down completely randomly.
Pair Corralation between Industrial Select and Virtus LifeSci
Considering the 90-day investment horizon Industrial Select is expected to generate 1.15 times less return on investment than Virtus LifeSci. But when comparing it to its historical volatility, Industrial Select Sector is 1.55 times less risky than Virtus LifeSci. It trades about 0.05 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,000 in Virtus LifeSci Biotech on January 17, 2024 and sell it today you would earn a total of 1,238 from holding Virtus LifeSci Biotech or generate 30.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. Virtus LifeSci Biotech
Performance |
| Timeline |
| Industrial Select Sector |
| Virtus LifeSci Biotech |
Industrial Select and Virtus LifeSci Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and Virtus LifeSci
The main advantage of trading using opposite Industrial Select and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select 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.| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
| Virtus LifeSci vs. Consumer Staples Select | Virtus LifeSci vs. Industrial Select Sector | Virtus LifeSci vs. Consumer Discretionary Select | Virtus LifeSci vs. Utilities Select Sector |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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