Correlation Between Invesco NASDAQ and Roundhill Video

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

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

Diversification Opportunities for Invesco NASDAQ and Roundhill Video

0.96

Correlation Coefficient

Invesco NASDAQ  Roundhill Video

Almost no diversification

The 3 months correlation between Invesco and Roundhill is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ Internet and Roundhill Video Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Video Games and Invesco NASDAQ 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 Invesco NASDAQ Internet are associated (or correlated) with Roundhill Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Video Games has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and Roundhill Video go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and Roundhill Video

Given the investment horizon of 90 days Invesco NASDAQ Internet is expected to generate 1.06 times more return on investment than Roundhill Video. However, Invesco NASDAQ is 1.06 times more volatile than Roundhill Video Games. It trades about 0.12 of its potential returns per unit of risk. Roundhill Video Games is currently generating about 0.07 per unit of risk. If you would invest  2,282  in Invesco NASDAQ Internet on September 22, 2024 and sell it today you would earn a total of  2,475  from holding Invesco NASDAQ Internet or generate 108.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Invesco NASDAQ Internet  vs.  Roundhill Video Games

Invesco NASDAQ Internet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco NASDAQ Internet are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Invesco NASDAQ may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Roundhill Video Games

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Video Games are ranked lower than 13 (%) 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.

Pair Trading with Invesco NASDAQ and Roundhill Video

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

The idea behind Invesco NASDAQ Internet and Roundhill Video Games 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.