Correlation Between Roundhill Investments and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Roundhill Investments and IShares 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 Investments and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roundhill Investments and iShares Trust, you can compare the effects of market volatilities on Roundhill Investments and IShares 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 Investments with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Investments and IShares Trust.
Diversification Opportunities for Roundhill Investments and IShares Trust
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Roundhill and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and IShares Trust go up and down completely randomly.
Pair Corralation between Roundhill Investments and IShares Trust
Given the investment horizon of 90 days Roundhill Investments is expected to generate 3.34 times more return on investment than IShares Trust. However, Roundhill Investments is 3.34 times more volatile than iShares Trust. It trades about 0.14 of its potential returns per unit of risk. iShares Trust is currently generating about 0.15 per unit of risk. If you would invest 2,559 in Roundhill Investments on September 13, 2024 and sell it today you would earn a total of 1,507 from holding Roundhill Investments or generate 58.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 50.0% |
| Values | Daily Returns |
Roundhill Investments vs. iShares Trust
Performance |
| Timeline |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| iShares Trust |
Roundhill Investments and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roundhill Investments and IShares Trust
The main advantage of trading using opposite Roundhill Investments and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill Investments position performs unexpectedly, IShares 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 IShares Trust will offset losses from the drop in IShares Trust's long position.| Roundhill Investments vs. SoFi Social 50 | Roundhill Investments vs. Global X Blockchain | Roundhill Investments vs. Tuttle Capital Short |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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