Correlation Between Roundhill ETF and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Roundhill ETF and Northern Lights 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 Roundhill ETF and Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roundhill ETF Trust and Northern Lights, you can compare the effects of market volatilities on Roundhill ETF and Northern Lights 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 Roundhill ETF with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill ETF and Northern Lights.
Diversification Opportunities for Roundhill ETF and Northern Lights
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Roundhill and Northern is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill ETF Trust and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Roundhill ETF 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 Roundhill ETF Trust are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Roundhill ETF i.e., Roundhill ETF and Northern Lights go up and down completely randomly.
Pair Corralation between Roundhill ETF and Northern Lights
Given the investment horizon of 90 days Roundhill ETF Trust is expected to under-perform the Northern Lights. But the etf apears to be less risky and, when comparing its historical volatility, Roundhill ETF Trust is 1.17 times less risky than Northern Lights. The etf trades about -0.07 of its potential returns per unit of risk. The Northern Lights is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,500 in Northern Lights on August 23, 2024 and sell it today you would earn a total of 52.00 from holding Northern Lights or generate 1.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Roundhill ETF Trust vs. Northern Lights
Performance |
| Timeline |
| Roundhill ETF Trust |
| Northern Lights |
Roundhill ETF and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roundhill ETF and Northern Lights
The main advantage of trading using opposite Roundhill ETF and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill ETF position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Roundhill ETF vs. Vanguard Russell 1000 | Roundhill ETF vs. Vanguard Russell 2000 | Roundhill ETF vs. Vanguard Mega Cap | Roundhill ETF vs. Vanguard Russell 1000 |
| Northern Lights vs. Sterling Capital Focus | Northern Lights vs. Roundhill ETF Trust | Northern Lights vs. Northern Lights | Northern Lights vs. First Trust Exchange Traded |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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