Correlation Between Roundhill Investments and Invesco FTSE

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

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

Diversification Opportunities for Roundhill Investments and Invesco FTSE

-0.68

Correlation Coefficient

Roundhill Investments  Invesco FTSE

Excellent diversification

The 3 months correlation between Roundhill and Invesco is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and Roundhill Investments 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 Investments are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and Invesco FTSE go up and down completely randomly.

Pair Corralation between Roundhill Investments and Invesco FTSE

Given the investment horizon of 90 days Roundhill Investments is expected to generate 2.9 times more return on investment than Invesco FTSE. However, Roundhill Investments is 2.9 times more volatile than Invesco FTSE RAFI. It trades about 0.11 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.02 per unit of risk. If you would invest  2,990  in Roundhill Investments on October 8, 2024 and sell it today you would earn a total of  1,076  from holding Roundhill Investments or generate 35.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	26.41%
Values	Daily Returns

Roundhill Investments  vs.  Invesco FTSE RAFI

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.

Invesco FTSE RAFI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco FTSE RAFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Invesco FTSE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Roundhill Investments and Invesco FTSE

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

The idea behind Roundhill Investments and Invesco FTSE RAFI 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.