Correlation Between Innovator Russell and Roundhill Investments

Can any of the company-specific risk be diversified away by investing in both Innovator 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 Innovator 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 Innovator Russell 2000 and Roundhill Investments, you can compare the effects of market volatilities on Innovator 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 Innovator Russell with a short position of Roundhill Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Russell and Roundhill Investments.

Diversification Opportunities for Innovator Russell and Roundhill Investments

-0.34

Correlation Coefficient

Innovator Russell  Roundhill Investments

Very good diversification

The 3 months correlation between Innovator and Roundhill is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments and Innovator 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 Innovator Russell 2000 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 Innovator Russell i.e., Innovator Russell and Roundhill Investments go up and down completely randomly.

Pair Corralation between Innovator Russell and Roundhill Investments

Given the investment horizon of 90 days Innovator Russell 2000 is expected to generate 0.96 times more return on investment than Roundhill Investments. However, Innovator Russell 2000 is 1.04 times less risky than Roundhill Investments. It trades about 0.07 of its potential returns per unit of risk. Roundhill Investments is currently generating about -0.02 per unit of risk. If you would invest  2,881  in Innovator Russell 2000 on October 10, 2024 and sell it today you would earn a total of  74.00  from holding Innovator Russell 2000 or generate 2.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.68%
Values	Daily Returns

Innovator Russell 2000  vs.  Roundhill Investments

Innovator Russell 2000

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Russell 2000 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Innovator Russell is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 comparatively stable technical and fundamental indicators, Roundhill Investments is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Innovator Russell and Roundhill Investments

The main advantage of trading using opposite Innovator Russell and Roundhill Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator 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 Innovator Russell 2000 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.