Correlation Between Roundhill Investments and MicroSectors Solactive
Can any of the company-specific risk be diversified away by investing in both Roundhill Investments and MicroSectors Solactive 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 Investments and MicroSectors Solactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roundhill Investments and MicroSectors Solactive FANG, you can compare the effects of market volatilities on Roundhill Investments and MicroSectors Solactive 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 Investments with a short position of MicroSectors Solactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Investments and MicroSectors Solactive.
Diversification Opportunities for Roundhill Investments and MicroSectors Solactive
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Roundhill and MicroSectors is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and MicroSectors Solactive FANG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Solactive and Roundhill Investments 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 Investments are associated (or correlated) with MicroSectors Solactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Solactive has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and MicroSectors Solactive go up and down completely randomly.
Pair Corralation between Roundhill Investments and MicroSectors Solactive
Given the investment horizon of 90 days Roundhill Investments is expected to generate 1.85 times less return on investment than MicroSectors Solactive. But when comparing it to its historical volatility, Roundhill Investments is 1.82 times less risky than MicroSectors Solactive. It trades about 0.1 of its potential returns per unit of risk. MicroSectors Solactive FANG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,664 in MicroSectors Solactive FANG on August 30, 2024 and sell it today you would earn a total of 13,049 from holding MicroSectors Solactive FANG or generate 489.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 31.31% |
| Values | Daily Returns |
Roundhill Investments vs. MicroSectors Solactive FANG
Performance |
| Timeline |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| MicroSectors Solactive |
Roundhill Investments and MicroSectors Solactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roundhill Investments and MicroSectors Solactive
The main advantage of trading using opposite Roundhill Investments and MicroSectors Solactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill Investments position performs unexpectedly, MicroSectors Solactive 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 MicroSectors Solactive will offset losses from the drop in MicroSectors Solactive's long position.The idea behind Roundhill Investments and MicroSectors Solactive FANG 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.
| MicroSectors Solactive vs. MicroSectors FANG Index | MicroSectors Solactive vs. Direxion Daily Dow | MicroSectors Solactive vs. Direxion Daily Semiconductor |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |