Correlation Between VanEck Biotech and Financial Select
Can any of the company-specific risk be diversified away by investing in both VanEck Biotech and Financial Select 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 VanEck Biotech and Financial Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Biotech ETF and Financial Select Sector, you can compare the effects of market volatilities on VanEck Biotech and Financial Select 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 VanEck Biotech with a short position of Financial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Biotech and Financial Select.
Diversification Opportunities for VanEck Biotech and Financial Select
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between VanEck and Financial is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Biotech ETF and Financial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Select Sector and VanEck Biotech 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 VanEck Biotech ETF are associated (or correlated) with Financial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Select Sector has no effect on the direction of VanEck Biotech i.e., VanEck Biotech and Financial Select go up and down completely randomly.
Pair Corralation between VanEck Biotech and Financial Select
Considering the 90-day investment horizon VanEck Biotech is expected to generate 12.08 times less return on investment than Financial Select. In addition to that, VanEck Biotech is 1.07 times more volatile than Financial Select Sector. It trades about 0.0 of its total potential returns per unit of risk. Financial Select Sector is currently generating about 0.06 per unit of volatility. If you would invest 3,215 in Financial Select Sector on January 19, 2024 and sell it today you would earn a total of 754.00 from holding Financial Select Sector or generate 23.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
VanEck Biotech ETF vs. Financial Select Sector
Performance |
| Timeline |
| VanEck Biotech ETF |
| Financial Select Sector |
VanEck Biotech and Financial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Biotech and Financial Select
The main advantage of trading using opposite VanEck Biotech and Financial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Biotech position performs unexpectedly, Financial Select 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 Financial Select will offset losses from the drop in Financial Select's long position.| VanEck Biotech vs. VanEck Pharmaceutical ETF | VanEck Biotech vs. VanEck Retail ETF | VanEck Biotech vs. First Trust NYSE | VanEck Biotech vs. Invesco Dynamic Biotechnology |
| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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