Correlation Between Dow Jones and Roundhill ETF
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Roundhill ETF 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 Dow Jones and Roundhill ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Roundhill ETF Trust, you can compare the effects of market volatilities on Dow Jones and Roundhill ETF 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 Dow Jones with a short position of Roundhill ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Roundhill ETF.
Diversification Opportunities for Dow Jones and Roundhill ETF
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Roundhill is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Roundhill ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill ETF Trust and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Roundhill ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill ETF Trust has no effect on the direction of Dow Jones i.e., Dow Jones and Roundhill ETF go up and down completely randomly.
Pair Corralation between Dow Jones and Roundhill ETF
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.42 times more return on investment than Roundhill ETF. However, Dow Jones is 1.42 times more volatile than Roundhill ETF Trust. It trades about 0.37 of its potential returns per unit of risk. Roundhill ETF Trust is currently generating about 0.35 per unit of risk. If you would invest 4,176,346 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 314,719 from holding Dow Jones Industrial or generate 7.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Roundhill ETF Trust
Performance |
| Timeline |
Dow Jones and Roundhill ETF Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Roundhill ETF Trust
Pair trading matchups for Roundhill ETF
Pair Trading with Dow Jones and Roundhill ETF
The main advantage of trading using opposite Dow Jones and Roundhill ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Roundhill ETF 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 Roundhill ETF will offset losses from the drop in Roundhill ETF's long position.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Roundhill ETF vs. Vanguard Total Stock | Roundhill ETF vs. SPDR SP 500 | Roundhill ETF vs. iShares Core SP | Roundhill ETF vs. Vanguard Dividend Appreciation |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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