Correlation Between TSJA and VanEck Biotech

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

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

Diversification Opportunities for TSJA and VanEck Biotech

-0.63

Correlation Coefficient

TSJA  VanEck Biotech

Excellent diversification

The 3 months correlation between TSJA and VanEck is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding TSJA and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF and TSJA 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 TSJA are associated (or correlated) with VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of TSJA i.e., TSJA and VanEck Biotech go up and down completely randomly.

Pair Corralation between TSJA and VanEck Biotech

If you would invest  2,906  in TSJA on February 4, 2024 and sell it today you would earn a total of  0.00  from holding TSJA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

TSJA  vs.  VanEck Biotech ETF

TSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, TSJA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

VanEck Biotech ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Biotech ETF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, VanEck Biotech is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with TSJA and VanEck Biotech

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

The idea behind TSJA and VanEck Biotech ETF 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.