Correlation Between Roundhill Magnificent and IShares MSCI

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

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

Diversification Opportunities for Roundhill Magnificent and IShares MSCI

-0.71

Correlation Coefficient

Roundhill Magnificent  IShares MSCI

Pay attention - limited upside

The 3 months correlation between Roundhill and IShares is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Magnificent Seven and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and Roundhill Magnificent 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 Magnificent Seven are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of Roundhill Magnificent i.e., Roundhill Magnificent and IShares MSCI go up and down completely randomly.

Pair Corralation between Roundhill Magnificent and IShares MSCI

Given the investment horizon of 90 days Roundhill Magnificent Seven is expected to under-perform the IShares MSCI. In addition to that, Roundhill Magnificent is 2.21 times more volatile than iShares MSCI EAFE. It trades about -0.14 of its total potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.11 per unit of volatility. If you would invest  6,085  in iShares MSCI EAFE on December 30, 2024 and sell it today you would earn a total of  346.00  from holding iShares MSCI EAFE or generate 5.69% return on investment over 90 days.

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

Roundhill Magnificent Seven  vs.  iShares MSCI EAFE

Roundhill Magnificent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roundhill Magnificent Seven has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

iShares MSCI EAFE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, IShares MSCI is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Roundhill Magnificent and IShares MSCI

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

The idea behind Roundhill Magnificent Seven and iShares MSCI EAFE 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.