Correlation Between Roundhill ETF and Avantis Small

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

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

Diversification Opportunities for Roundhill ETF and Avantis Small

0.89

Correlation Coefficient

Roundhill ETF  Avantis Small

Very poor diversification

The 3 months correlation between Roundhill and Avantis is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill ETF Trust and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap and Roundhill ETF 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 ETF Trust are associated (or correlated) with Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Roundhill ETF i.e., Roundhill ETF and Avantis Small go up and down completely randomly.

Pair Corralation between Roundhill ETF and Avantis Small

Given the investment horizon of 90 days Roundhill ETF Trust is expected to generate 0.65 times more return on investment than Avantis Small. However, Roundhill ETF Trust is 1.53 times less risky than Avantis Small. It trades about 0.22 of its potential returns per unit of risk. Avantis Small Cap is currently generating about 0.11 per unit of risk. If you would invest  3,841  in Roundhill ETF Trust on September 16, 2024 and sell it today you would earn a total of  501.00  from holding Roundhill ETF Trust or generate 13.04% return on investment over 90 days.

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

Roundhill ETF Trust  vs.  Avantis Small Cap

Roundhill ETF Trust

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill ETF Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Roundhill ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Avantis Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Small Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Avantis Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Roundhill ETF and Avantis Small

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

The idea behind Roundhill ETF Trust and Avantis Small Cap 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.