Correlation Between Roundhill Investments and Innovator
Can any of the company-specific risk be diversified away by investing in both Roundhill Investments and Innovator 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 Innovator into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Roundhill Investments and Innovator 20 Year, you can compare the effects of market volatilities on Roundhill Investments and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Investments and Innovator.
Diversification Opportunities for Roundhill Investments and Innovator
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Roundhill and Innovator is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and Innovator 20 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator 20 Year 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator 20 Year has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and Innovator go up and down completely randomly.
Pair Corralation between Roundhill Investments and Innovator
Given the investment horizon of 90 days Roundhill Investments is expected to generate 3.26 times more return on investment than Innovator. However, Roundhill Investments is 3.26 times more volatile than Innovator 20 Year. It trades about 0.1 of its potential returns per unit of risk. Innovator 20 Year is currently generating about 0.01 per unit of risk. If you would invest 3,178 in Roundhill Investments on September 1, 2024 and sell it today you would earn a total of 888.00 from holding Roundhill Investments or generate 27.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 25.0% |
| Values | Daily Returns |
Roundhill Investments vs. Innovator 20 Year
Performance |
| Timeline |
| Roundhill Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Innovator 20 Year |
Roundhill Investments and Innovator Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Roundhill Investments and Innovator
The main advantage of trading using opposite Roundhill Investments and Innovator positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill Investments position performs unexpectedly, Innovator 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 Innovator will offset losses from the drop in Innovator's long position.The idea behind Roundhill Investments and Innovator 20 Year 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.| Innovator vs. Innovator ETFs Trust | Innovator vs. First Trust Cboe | Innovator vs. Innovator SP 500 | Innovator vs. Innovator Equity Power |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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