Correlation Between Consumer Staples and Virtus LifeSci

Can any of the company-specific risk be diversified away by investing in both Consumer Staples 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 Consumer Staples and Virtus LifeSci into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consumer Staples Select and Virtus LifeSci Biotech, you can compare the effects of market volatilities on Consumer Staples 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 Consumer Staples with a short position of Virtus LifeSci. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Virtus LifeSci.

Diversification Opportunities for Consumer Staples and Virtus LifeSci

-0.34

Correlation Coefficient

Consumer Staples  Virtus LifeSci

Very good diversification

The 3 months correlation between Consumer and Virtus is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples 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 Consumer Staples 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 Consumer Staples 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 Consumer Staples i.e., Consumer Staples and Virtus LifeSci go up and down completely randomly.

Pair Corralation between Consumer Staples and Virtus LifeSci

Considering the 90-day investment horizon Consumer Staples Select is expected to generate 0.39 times more return on investment than Virtus LifeSci. However, Consumer Staples Select is 2.6 times less risky than Virtus LifeSci. It trades about 0.21 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.07 per unit of risk. If you would invest  7,217  in Consumer Staples Select on February 14, 2024 and sell it today you would earn a total of  508.00  from holding Consumer Staples Select or generate 7.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Consumer Staples Select  vs.  Virtus LifeSci Biotech

Consumer Staples Select

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Staples Select are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Consumer Staples may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Virtus LifeSci Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus LifeSci Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Virtus LifeSci is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Consumer Staples and Virtus LifeSci

The main advantage of trading using opposite Consumer Staples and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples 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.

The idea behind Consumer Staples Select and Virtus LifeSci Biotech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.