Correlation Between Exxon and Roundhill ETF
Can any of the company-specific risk be diversified away by investing in both Exxon and Roundhill 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 Exxon and Roundhill ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Roundhill ETF Trust, you can compare the effects of market volatilities on Exxon and Roundhill 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 Exxon with a short position of Roundhill ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Roundhill ETF.
Diversification Opportunities for Exxon and Roundhill ETF
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Roundhill is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Roundhill ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill ETF Trust and Exxon 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 Exxon Mobil Corp are associated (or correlated) with Roundhill ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill ETF Trust has no effect on the direction of Exxon i.e., Exxon and Roundhill ETF go up and down completely randomly.
Pair Corralation between Exxon and Roundhill ETF
Considering the 90-day investment horizon Exxon is expected to generate 2.27 times less return on investment than Roundhill ETF. In addition to that, Exxon is 1.91 times more volatile than Roundhill ETF Trust. It trades about 0.03 of its total potential returns per unit of risk. Roundhill ETF Trust is currently generating about 0.13 per unit of volatility. If you would invest 4,448 in Roundhill ETF Trust on September 3, 2024 and sell it today you would earn a total of 858.00 from holding Roundhill ETF Trust or generate 19.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 37.78% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Roundhill ETF Trust
Performance |
| Timeline |
| Exxon Mobil Corp |
| Roundhill ETF Trust |
Exxon and Roundhill ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Roundhill ETF
The main advantage of trading using opposite Exxon and Roundhill ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Roundhill 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 Roundhill ETF will offset losses from the drop in Roundhill ETF's long position.The idea behind Exxon Mobil Corp and Roundhill 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.| Roundhill ETF vs. FT Vest Equity | Roundhill ETF vs. Northern Lights | Roundhill ETF vs. Dimensional International High | Roundhill ETF vs. JPMorgan Fundamental Data |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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