Correlation Between Innovator ETFs and Virtus LifeSci

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

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

Diversification Opportunities for Innovator ETFs and Virtus LifeSci

-0.53

Correlation Coefficient

Innovator ETFs  Virtus LifeSci

Excellent diversification

The 3 months correlation between Innovator and Virtus is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Innovator ETFs Trust and Virtus LifeSci Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus LifeSci Biotech and Innovator ETFs 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 Innovator ETFs Trust are associated (or correlated) with Virtus LifeSci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus LifeSci Biotech has no effect on the direction of Innovator ETFs i.e., Innovator ETFs and Virtus LifeSci go up and down completely randomly.

Pair Corralation between Innovator ETFs and Virtus LifeSci

Given the investment horizon of 90 days Innovator ETFs is expected to generate 4.47 times less return on investment than Virtus LifeSci. But when comparing it to its historical volatility, Innovator ETFs Trust is 5.89 times less risky than Virtus LifeSci. It trades about 0.05 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,500  in Virtus LifeSci Biotech on February 3, 2024 and sell it today you would earn a total of  51.00  from holding Virtus LifeSci Biotech or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Innovator ETFs Trust  vs.  Virtus LifeSci Biotech

Innovator ETFs Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator ETFs Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Innovator ETFs is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Virtus LifeSci Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virtus LifeSci Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Virtus LifeSci is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Innovator ETFs and Virtus LifeSci

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

The idea behind Innovator ETFs Trust and Virtus LifeSci Biotech 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.