Correlation Between First Trust and Roundhill Sports
Can any of the company-specific risk be diversified away by investing in both First Trust and Roundhill Sports 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 Roundhill Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Consumer and Roundhill Sports Betting, you can compare the effects of market volatilities on First Trust and Roundhill Sports 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 Roundhill Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Roundhill Sports.
Diversification Opportunities for First Trust and Roundhill Sports
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Roundhill is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Consumer and Roundhill Sports Betting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Sports Betting 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 Consumer are associated (or correlated) with Roundhill Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Sports Betting has no effect on the direction of First Trust i.e., First Trust and Roundhill Sports go up and down completely randomly.
Pair Corralation between First Trust and Roundhill Sports
Considering the 90-day investment horizon First Trust is expected to generate 1.23 times less return on investment than Roundhill Sports. But when comparing it to its historical volatility, First Trust Consumer is 1.16 times less risky than Roundhill Sports. It trades about 0.05 of its potential returns per unit of risk. Roundhill Sports Betting is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,606 in Roundhill Sports Betting on November 19, 2024 and sell it today you would earn a total of 570.30 from holding Roundhill Sports Betting or generate 35.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Consumer vs. Roundhill Sports Betting
Performance |
| Timeline |
| First Trust Consumer |
| Roundhill Sports Betting |
First Trust and Roundhill Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Roundhill Sports
The main advantage of trading using opposite First Trust and Roundhill Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Roundhill Sports 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 Sports will offset losses from the drop in Roundhill Sports' long position.| First Trust vs. First Trust Consumer | First Trust vs. First Trust IndustrialsProducer | First Trust vs. First Trust Health | First Trust vs. First Trust Materials |
| Roundhill Sports vs. Roundhill Video Games | Roundhill Sports vs. Gan | Roundhill Sports vs. VanEck Video Gaming | Roundhill Sports vs. VanEck Gaming ETF |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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