Correlation Between Vanguard Health and IShares Biotechnology
Can any of the company-specific risk be diversified away by investing in both Vanguard Health and IShares Biotechnology 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 Vanguard Health and IShares Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Health Care and iShares Biotechnology ETF, you can compare the effects of market volatilities on Vanguard Health and IShares Biotechnology 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 Vanguard Health with a short position of IShares Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Health and IShares Biotechnology.
Diversification Opportunities for Vanguard Health and IShares Biotechnology
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and IShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Health Care and iShares Biotechnology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Biotechnology ETF and Vanguard Health 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 Vanguard Health Care are associated (or correlated) with IShares Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Biotechnology ETF has no effect on the direction of Vanguard Health i.e., Vanguard Health and IShares Biotechnology go up and down completely randomly.
Pair Corralation between Vanguard Health and IShares Biotechnology
Considering the 90-day investment horizon Vanguard Health Care is expected to generate 0.67 times more return on investment than IShares Biotechnology. However, Vanguard Health Care is 1.49 times less risky than IShares Biotechnology. It trades about 0.03 of its potential returns per unit of risk. iShares Biotechnology ETF is currently generating about 0.02 per unit of risk. If you would invest 24,418 in Vanguard Health Care on August 30, 2024 and sell it today you would earn a total of 2,720 from holding Vanguard Health Care or generate 11.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Health Care vs. iShares Biotechnology ETF
Performance |
| Timeline |
| Vanguard Health Care |
| iShares Biotechnology ETF |
Vanguard Health and IShares Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Health and IShares Biotechnology
The main advantage of trading using opposite Vanguard Health and IShares Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Health position performs unexpectedly, IShares Biotechnology 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 IShares Biotechnology will offset losses from the drop in IShares Biotechnology's long position.| Vanguard Health vs. Vanguard Consumer Staples | Vanguard Health vs. Vanguard Financials Index | Vanguard Health vs. Vanguard Information Technology | Vanguard Health vs. Vanguard Consumer Discretionary |
| IShares Biotechnology vs. First Trust Exchange Traded | IShares Biotechnology vs. Ultimus Managers Trust | IShares Biotechnology vs. Horizon Kinetics Medical | IShares Biotechnology vs. Harbor Health Care |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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