Correlation Between Invesco CurrencyShares and Roundhill ETF

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

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

Diversification Opportunities for Invesco CurrencyShares and Roundhill ETF

0.43

Correlation Coefficient

Invesco CurrencyShares  Roundhill ETF

Very weak diversification

The 3 months correlation between Invesco and Roundhill is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes 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 Invesco CurrencyShares 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 Invesco CurrencyShares Japanese 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 Invesco CurrencyShares i.e., Invesco CurrencyShares and Roundhill ETF go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and Roundhill ETF

Considering the 90-day investment horizon Invesco CurrencyShares is expected to generate 3.5 times less return on investment than Roundhill ETF. But when comparing it to its historical volatility, Invesco CurrencyShares Japanese is 1.87 times less risky than Roundhill ETF. It trades about 0.0 of its potential returns per unit of risk. Roundhill ETF Trust is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,865  in Roundhill ETF Trust on November 28, 2024 and sell it today you would lose (11.00) from holding Roundhill ETF Trust or give up 0.28% of portfolio value over 90 days.

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

Invesco CurrencyShares Japanes  vs.  Roundhill ETF Trust

Invesco CurrencyShares

Risk-Adjusted Performance

Weak

Over the last 90 days Invesco CurrencyShares Japanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Roundhill ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roundhill ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Roundhill ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Invesco CurrencyShares and Roundhill ETF

The main advantage of trading using opposite Invesco CurrencyShares and Roundhill ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco CurrencyShares 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 Invesco CurrencyShares Japanese 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..