Correlation Between Virtus LifeSci and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci and SPDR SP 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 SPDR SP 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 SPDR SP Biotech, you can compare the effects of market volatilities on Virtus LifeSci and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and SPDR SP.
Diversification Opportunities for Virtus LifeSci and SPDR SP
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Virtus and SPDR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and SPDR SP Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Biotech 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Biotech has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and SPDR SP go up and down completely randomly.
Pair Corralation between Virtus LifeSci and SPDR SP
Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to under-perform the SPDR SP. But the etf apears to be less risky and, when comparing its historical volatility, Virtus LifeSci Biotech is 1.28 times less risky than SPDR SP. The etf trades about -0.3 of its potential returns per unit of risk. The SPDR SP Biotech is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest 10,153 in SPDR SP Biotech on December 30, 2023 and sell it today you would lose (664.00) from holding SPDR SP Biotech or give up 6.54% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Virtus LifeSci Biotech vs. SPDR SP Biotech
Performance |
Timeline |
Virtus LifeSci Biotech |
SPDR SP Biotech |
Virtus LifeSci and SPDR SP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Virtus LifeSci and SPDR SP
The main advantage of trading using opposite Virtus LifeSci and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.Virtus LifeSci vs. Health Care Select | Virtus LifeSci vs. Vanguard Health Care | Virtus LifeSci vs. IShares Biotechnology ETF | Virtus LifeSci vs. SPDR SP Biotech |
SPDR SP vs. Health Care Select | SPDR SP vs. Vanguard Health Care | SPDR SP vs. IShares Biotechnology ETF | SPDR SP vs. IShares US Medical |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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