Correlation Between Health Care and Virtus LifeSci
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Virtus LifeSci into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Select and Virtus LifeSci Biotech, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Virtus LifeSci.
Diversification Opportunities for Health Care and Virtus LifeSci
0.93 | Correlation Coefficient |
Almost no diversification
The 1 month correlation between Health and Virtus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Health Care Select 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 Health Care 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 Health Care Select 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 Health Care i.e., Health Care and Virtus LifeSci go up and down completely randomly.
Pair Corralation between Health Care and Virtus LifeSci
Considering the 90-day investment horizon Health Care Select is expected to generate 0.45 times more return on investment than Virtus LifeSci. However, Health Care Select is 2.23 times less risky than Virtus LifeSci. It trades about 0.04 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.1 per unit of risk. If you would invest 13,877 in Health Care Select on January 26, 2024 and sell it today you would earn a total of 209.00 from holding Health Care Select or generate 1.51% return on investment over 90 days.
| Time Period | 1 Month [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Select vs. Virtus LifeSci Biotech
Performance |
| Timeline |
| Health Care Select |
| Virtus LifeSci Biotech |
Health Care and Virtus LifeSci Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Virtus LifeSci
The main advantage of trading using opposite Health Care and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. iShares Insurance ETF | Health Care vs. SCOR PK | Health Care vs. Morningstar Unconstrained Allocation | Health Care vs. SPACE |
| Virtus LifeSci vs. iShares Insurance ETF | Virtus LifeSci vs. SCOR PK | Virtus LifeSci vs. Morningstar Unconstrained Allocation | Virtus LifeSci vs. SPACE |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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