Correlation Between Virtus LifeSci and IShares US

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Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci and IShares US 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 Virtus LifeSci and IShares US into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Virtus LifeSci Biotech and IShares US Healthcare, you can compare the effects of market volatilities on Virtus LifeSci and IShares US 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 Virtus LifeSci with a short position of IShares US. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and IShares US.

Diversification Opportunities for Virtus LifeSci and IShares US

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Virtus and IShares is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and IShares US Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares US Healthcare and Virtus LifeSci 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 Virtus LifeSci Biotech are associated (or correlated) with IShares US. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares US Healthcare has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and IShares US go up and down completely randomly.

Pair Corralation between Virtus LifeSci and IShares US

Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to under-perform the IShares US. In addition to that, Virtus LifeSci is 3.39 times more volatile than IShares US Healthcare. It trades about -0.11 of its total potential returns per unit of risk. IShares US Healthcare is currently generating about 0.11 per unit of volatility. If you would invest  6,105  in IShares US Healthcare on December 30, 2023 and sell it today you would earn a total of  85.00  from holding IShares US Healthcare or generate 1.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Virtus LifeSci Biotech  vs.  IShares US Healthcare

 Performance 
       Timeline  
Virtus LifeSci Biotech 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Virtus LifeSci Biotech are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental drivers, Virtus LifeSci exhibited solid returns over the last few months and may actually be approaching a breakup point.
IShares US Healthcare 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in IShares US Healthcare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, IShares US may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Virtus LifeSci and IShares US Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Virtus LifeSci and IShares US

The main advantage of trading using opposite Virtus LifeSci and IShares US positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci position performs unexpectedly, IShares US 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 IShares US will offset losses from the drop in IShares US's long position.
The idea behind Virtus LifeSci Biotech and IShares US Healthcare 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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