Correlation Between Roundhill Magnificent and First Trust
Can any of the company-specific risk be diversified away by investing in both Roundhill Magnificent and First Trust 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 Magnificent and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roundhill Magnificent Seven and First Trust Enhanced, you can compare the effects of market volatilities on Roundhill Magnificent and First Trust 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 Magnificent with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Magnificent and First Trust.
Diversification Opportunities for Roundhill Magnificent and First Trust
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Roundhill and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Magnificent Seven and First Trust Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Enhanced and Roundhill Magnificent 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 Magnificent Seven are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Enhanced has no effect on the direction of Roundhill Magnificent i.e., Roundhill Magnificent and First Trust go up and down completely randomly.
Pair Corralation between Roundhill Magnificent and First Trust
Given the investment horizon of 90 days Roundhill Magnificent Seven is expected to generate 1.83 times more return on investment than First Trust. However, Roundhill Magnificent is 1.83 times more volatile than First Trust Enhanced. It trades about 0.13 of its potential returns per unit of risk. First Trust Enhanced is currently generating about 0.1 per unit of risk. If you would invest 2,436 in Roundhill Magnificent Seven on August 29, 2024 and sell it today you would earn a total of 2,709 from holding Roundhill Magnificent Seven or generate 111.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 83.27% |
| Values | Daily Returns |
Roundhill Magnificent Seven vs. First Trust Enhanced
Performance |
| Timeline |
| Roundhill Magnificent |
| First Trust Enhanced |
Roundhill Magnificent and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roundhill Magnificent and First Trust
The main advantage of trading using opposite Roundhill Magnificent and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill Magnificent position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Roundhill Magnificent vs. Bitwise Funds Trust | Roundhill Magnificent vs. FT Vest Equity | Roundhill Magnificent vs. Zillow Group Class | Roundhill Magnificent vs. Northern Lights |
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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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