Correlation Between Roundhill Video and First Trust

Can any of the company-specific risk be diversified away by investing in both Roundhill Video and First Trust 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 First Trust 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 First Trust Consumer, you can compare the effects of market volatilities on Roundhill Video and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill Video and First Trust.

Diversification Opportunities for Roundhill Video and First Trust

0.87

Correlation Coefficient

Roundhill Video  First Trust

Very poor diversification

The 3 months correlation between Roundhill and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Video Games and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Consumer has no effect on the direction of Roundhill Video i.e., Roundhill Video and First Trust go up and down completely randomly.

Pair Corralation between Roundhill Video and First Trust

Given the investment horizon of 90 days Roundhill Video Games is expected to generate 1.03 times more return on investment than First Trust. However, Roundhill Video is 1.03 times more volatile than First Trust Consumer. It trades about 0.07 of its potential returns per unit of risk. First Trust Consumer is currently generating about 0.04 per unit of risk. If you would invest  1,398  in Roundhill Video Games on October 5, 2024 and sell it today you would earn a total of  602.00  from holding Roundhill Video Games or generate 43.06% return on investment over 90 days.

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

Roundhill Video Games  vs.  First Trust Consumer

Roundhill Video Games

Risk-Adjusted Performance

10 of 100

OK

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

First Trust Consumer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Consumer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Roundhill Video and First Trust

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

The idea behind Roundhill Video Games and First Trust Consumer 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.