Correlation Between First Trust and Roundhill Video

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

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

Diversification Opportunities for First Trust and Roundhill Video

0.97

Correlation Coefficient

First Trust  Roundhill Video

Almost no diversification

The 3 months correlation between First and Roundhill is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Trust S Network and Roundhill Video Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Video Games and First Trust 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 First Trust S Network are associated (or correlated) with Roundhill Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Video Games has no effect on the direction of First Trust i.e., First Trust and Roundhill Video go up and down completely randomly.

Pair Corralation between First Trust and Roundhill Video

Given the investment horizon of 90 days First Trust is expected to generate 1.31 times less return on investment than Roundhill Video. But when comparing it to its historical volatility, First Trust S Network is 1.11 times less risky than Roundhill Video. It trades about 0.08 of its potential returns per unit of risk. Roundhill Video Games is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,548  in Roundhill Video Games on October 7, 2024 and sell it today you would earn a total of  479.00  from holding Roundhill Video Games or generate 30.94% return on investment over 90 days.

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

First Trust S Network  vs.  Roundhill Video Games

First Trust S

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust S Network are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, First Trust is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Roundhill Video Games

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Video Games are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Roundhill Video exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Roundhill Video

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

The idea behind First Trust S Network and Roundhill Video Games 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.