Correlation Between First Trust and Virtus LifeSci

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

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

Diversification Opportunities for First Trust and Virtus LifeSci

0.04

Correlation Coefficient

First Trust  Virtus LifeSci

Significant diversification

The 3 months correlation between First and Virtus is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Trust NYSE 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 First Trust 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 First Trust NYSE 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 First Trust i.e., First Trust and Virtus LifeSci go up and down completely randomly.

Pair Corralation between First Trust and Virtus LifeSci

Considering the 90-day investment horizon First Trust NYSE is expected to generate 0.49 times more return on investment than Virtus LifeSci. However, First Trust NYSE is 2.04 times less risky than Virtus LifeSci. It trades about 0.0 of its potential returns per unit of risk. Virtus LifeSci Biotech is currently generating about -0.18 per unit of risk. If you would invest  16,718  in First Trust NYSE on December 27, 2024 and sell it today you would lose (109.00) from holding First Trust NYSE or give up 0.65% of portfolio value over 90 days.

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

First Trust NYSE  vs.  Virtus LifeSci Biotech

First Trust NYSE

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust NYSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, First Trust is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Virtus LifeSci Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Virtus LifeSci Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with First Trust and Virtus LifeSci

The main advantage of trading using opposite First Trust and Virtus LifeSci positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust NYSE 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.