Correlation Between Roundhill Investments and IndexIQ ETF
Can any of the company-specific risk be diversified away by investing in both Roundhill Investments and IndexIQ ETF 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 IndexIQ ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roundhill Investments and IndexIQ ETF Trust, you can compare the effects of market volatilities on Roundhill Investments and IndexIQ ETF 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 IndexIQ ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Investments and IndexIQ ETF.
Diversification Opportunities for Roundhill Investments and IndexIQ ETF
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Roundhill and IndexIQ is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and IndexIQ ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ ETF 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 IndexIQ ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ ETF Trust has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and IndexIQ ETF go up and down completely randomly.
Pair Corralation between Roundhill Investments and IndexIQ ETF
Given the investment horizon of 90 days Roundhill Investments is expected to generate 2.5 times more return on investment than IndexIQ ETF. However, Roundhill Investments is 2.5 times more volatile than IndexIQ ETF Trust. It trades about 0.1 of its potential returns per unit of risk. IndexIQ ETF Trust is currently generating about 0.03 per unit of risk. If you would invest 2,894 in Roundhill Investments on August 30, 2024 and sell it today you would earn a total of 1,172 from holding Roundhill Investments or generate 40.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 31.31% |
| Values | Daily Returns |
Roundhill Investments vs. IndexIQ ETF Trust
Performance |
| Timeline |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| IndexIQ ETF Trust |
Roundhill Investments and IndexIQ ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roundhill Investments and IndexIQ ETF
The main advantage of trading using opposite Roundhill Investments and IndexIQ ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill Investments position performs unexpectedly, IndexIQ ETF 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 IndexIQ ETF will offset losses from the drop in IndexIQ ETF's long position.The idea behind Roundhill Investments and IndexIQ ETF Trust 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.
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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