Correlation Between VictoryShares THB and Roundhill Magnificent

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

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

Diversification Opportunities for VictoryShares THB and Roundhill Magnificent

-0.32

Correlation Coefficient

VictoryShares THB  Roundhill Magnificent

Very good diversification

The 3 months correlation between VictoryShares and Roundhill is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares THB Mid and Roundhill Magnificent Seven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Magnificent and VictoryShares THB 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 VictoryShares THB Mid are associated (or correlated) with Roundhill Magnificent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Magnificent has no effect on the direction of VictoryShares THB i.e., VictoryShares THB and Roundhill Magnificent go up and down completely randomly.

Pair Corralation between VictoryShares THB and Roundhill Magnificent

Given the investment horizon of 90 days VictoryShares THB Mid is expected to under-perform the Roundhill Magnificent. But the etf apears to be less risky and, when comparing its historical volatility, VictoryShares THB Mid is 2.1 times less risky than Roundhill Magnificent. The etf trades about -0.42 of its potential returns per unit of risk. The Roundhill Magnificent Seven is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,448  in Roundhill Magnificent Seven on October 10, 2024 and sell it today you would earn a total of  67.00  from holding Roundhill Magnificent Seven or generate 1.23% return on investment over 90 days.

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

VictoryShares THB Mid  vs.  Roundhill Magnificent Seven

VictoryShares THB Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VictoryShares THB Mid has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, VictoryShares THB is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Roundhill Magnificent

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Magnificent Seven are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Roundhill Magnificent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VictoryShares THB and Roundhill Magnificent

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

The idea behind VictoryShares THB Mid and Roundhill Magnificent Seven 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.