Correlation Between Virtus LifeSci and Invesco DWA

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

Diversification Opportunities for Virtus LifeSci and Invesco DWA

0.44

Correlation Coefficient

Virtus LifeSci  Invesco DWA

Very weak diversification

The 3 months correlation between Virtus and Invesco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Virtus LifeSci Biotech and Invesco DWA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Healthcare 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 DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Healthcare has no effect on the direction of Virtus LifeSci i.e., Virtus LifeSci and Invesco DWA go up and down completely randomly.

Pair Corralation between Virtus LifeSci and Invesco DWA

Considering the 90-day investment horizon Virtus LifeSci Biotech is expected to generate 1.0 times more return on investment than Invesco DWA. However, Virtus LifeSci Biotech is 1.0 times less risky than Invesco DWA. It trades about -0.07 of its potential returns per unit of risk. Invesco DWA Healthcare is currently generating about -0.17 per unit of risk. If you would invest  6,443  in Virtus LifeSci Biotech on September 20, 2024 and sell it today you would lose (467.00) from holding Virtus LifeSci Biotech or give up 7.25% of portfolio value over 90 days.

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

Virtus LifeSci Biotech  vs.  Invesco DWA Healthcare

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 latest unsteady performance, the Etf's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Invesco DWA Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco DWA Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Pair Trading with Virtus LifeSci and Invesco DWA

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

The idea behind Virtus LifeSci Biotech and Invesco DWA Healthcare 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.