Correlation Between Virtus LifeSci and Invesco Dynamic

Can any of the company-specific risk be diversified away by investing in both Virtus LifeSci and Invesco Dynamic 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 Invesco Dynamic 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 Invesco Dynamic Food, you can compare the effects of market volatilities on Virtus LifeSci and Invesco Dynamic 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 Invesco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Virtus LifeSci and Invesco Dynamic.

Diversification Opportunities for Virtus LifeSci and Invesco Dynamic

0.18

Correlation Coefficient

Virtus LifeSci  Invesco Dynamic

Average diversification

The 3 months correlation between Virtus and Invesco is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and Invesco Dynamic Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Food 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 Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Food has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and Invesco Dynamic go up and down completely randomly.

Pair Corralation between Virtus LifeSci and Invesco Dynamic

Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to under-perform the Invesco Dynamic. In addition to that, Virtus LifeSci is 3.5 times more volatile than Invesco Dynamic Food. It trades about -0.19 of its total potential returns per unit of risk. Invesco Dynamic Food is currently generating about -0.03 per unit of volatility. If you would invest  4,851  in Invesco Dynamic Food on January 31, 2024 and sell it today you would lose (19.00) from holding Invesco Dynamic Food or give up 0.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Virtus LifeSci Biotech  vs.  Invesco Dynamic Food

Virtus LifeSci Biotech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus LifeSci Biotech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Virtus LifeSci is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco Dynamic Food

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Food are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Invesco Dynamic may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Virtus LifeSci and Invesco Dynamic

The main advantage of trading using opposite Virtus LifeSci and Invesco Dynamic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus LifeSci position performs unexpectedly, Invesco Dynamic 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 Invesco Dynamic will offset losses from the drop in Invesco Dynamic's long position.

The idea behind Virtus LifeSci Biotech and Invesco Dynamic Food 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.