Correlation Between Roundhill Sports and First Trust

Can any of the company-specific risk be diversified away by investing in both Roundhill Sports and First 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 Sports and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Roundhill Sports Betting and First Trust Consumer, you can compare the effects of market volatilities on Roundhill Sports and First 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 Sports with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Sports and First Trust.

Diversification Opportunities for Roundhill Sports and First Trust

0.89

Correlation Coefficient

Roundhill Sports  First Trust

Very poor diversification

The 3 months correlation between Roundhill and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Sports Betting and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer and Roundhill Sports 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 Sports Betting are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Consumer has no effect on the direction of Roundhill Sports i.e., Roundhill Sports and First Trust go up and down completely randomly.

Pair Corralation between Roundhill Sports and First Trust

Given the investment horizon of 90 days Roundhill Sports is expected to generate 2.21 times less return on investment than First Trust. In addition to that, Roundhill Sports is 1.1 times more volatile than First Trust Consumer. It trades about 0.03 of its total potential returns per unit of risk. First Trust Consumer is currently generating about 0.07 per unit of volatility. If you would invest  6,187  in First Trust Consumer on October 5, 2024 and sell it today you would earn a total of  252.00  from holding First Trust Consumer or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Roundhill Sports Betting  vs.  First Trust Consumer

Roundhill Sports Betting

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Sports Betting are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Roundhill Sports is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Trust Consumer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Consumer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Roundhill Sports and First Trust

The main advantage of trading using opposite Roundhill Sports and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roundhill Sports position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.

The idea behind Roundhill Sports Betting and First Trust Consumer 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.