Correlation Between IShares Russell and Roundhill Investments

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

By analyzing existing cross correlation between iShares Russell Mid Cap and Roundhill Investments, you can compare the effects of market volatilities on IShares Russell and Roundhill Investments 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 IShares Russell with a short position of Roundhill Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and Roundhill Investments.

Diversification Opportunities for IShares Russell and Roundhill Investments

0.87

Correlation Coefficient

IShares Russell  Roundhill Investments

Very poor diversification

The 3 months correlation between IShares and Roundhill is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell Mid Cap and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments and IShares Russell 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 iShares Russell Mid Cap are associated (or correlated) with Roundhill Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Investments has no effect on the direction of IShares Russell i.e., IShares Russell and Roundhill Investments go up and down completely randomly.

Pair Corralation between IShares Russell and Roundhill Investments

If you would invest  10,986  in iShares Russell Mid Cap on September 13, 2024 and sell it today you would earn a total of  2,451  from holding iShares Russell Mid Cap or generate 22.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.8%
Values	Daily Returns

iShares Russell Mid Cap  vs.  Roundhill Investments

iShares Russell Mid

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Russell Mid Cap are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, IShares Russell reported solid returns over the last few months and may actually be approaching a breakup point.

Roundhill Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with IShares Russell and Roundhill Investments

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

The idea behind iShares Russell Mid Cap and Roundhill Investments 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.