Correlation Between Roundhill Video and AdvisorShares Hotel

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

By analyzing existing cross correlation between Roundhill Video Games and AdvisorShares Hotel ETF, you can compare the effects of market volatilities on Roundhill Video and AdvisorShares Hotel 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 Video with a short position of AdvisorShares Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Video and AdvisorShares Hotel.

Diversification Opportunities for Roundhill Video and AdvisorShares Hotel

0.94

Correlation Coefficient

Roundhill Video  AdvisorShares Hotel

Almost no diversification

The 3 months correlation between Roundhill and AdvisorShares is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Video Games and AdvisorShares Hotel ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Hotel ETF and Roundhill Video 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 Video Games are associated (or correlated) with AdvisorShares Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Hotel ETF has no effect on the direction of Roundhill Video i.e., Roundhill Video and AdvisorShares Hotel go up and down completely randomly.

Pair Corralation between Roundhill Video and AdvisorShares Hotel

Given the investment horizon of 90 days Roundhill Video Games is expected to under-perform the AdvisorShares Hotel. In addition to that, Roundhill Video is 1.36 times more volatile than AdvisorShares Hotel ETF. It trades about -0.14 of its total potential returns per unit of risk. AdvisorShares Hotel ETF is currently generating about -0.17 per unit of volatility. If you would invest  3,419  in AdvisorShares Hotel ETF on October 6, 2024 and sell it today you would lose (142.00) from holding AdvisorShares Hotel ETF or give up 4.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Roundhill Video Games  vs.  AdvisorShares Hotel ETF

Roundhill Video Games

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Video Games are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Roundhill Video exhibited solid returns over the last few months and may actually be approaching a breakup point.

AdvisorShares Hotel ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Hotel ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, AdvisorShares Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Roundhill Video and AdvisorShares Hotel

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

The idea behind Roundhill Video Games and AdvisorShares Hotel ETF 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.