Correlation Between Roundhill ETF and SPDR SP

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

Diversification Opportunities for Roundhill ETF and SPDR SP

0.95

Correlation Coefficient

Roundhill ETF  SPDR SP

Almost no diversification

The 3 months correlation between Roundhill and SPDR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill ETF Trust and SPDR SP Kensho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Kensho 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Kensho has no effect on the direction of Roundhill ETF i.e., Roundhill ETF and SPDR SP go up and down completely randomly.

Pair Corralation between Roundhill ETF and SPDR SP

Given the investment horizon of 90 days Roundhill ETF is expected to generate 1.12 times less return on investment than SPDR SP. But when comparing it to its historical volatility, Roundhill ETF Trust is 1.27 times less risky than SPDR SP. It trades about 0.22 of its potential returns per unit of risk. SPDR SP Kensho is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  5,938  in SPDR SP Kensho on September 16, 2024 and sell it today you would earn a total of  865.00  from holding SPDR SP Kensho or generate 14.57% return on investment over 90 days.

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

Roundhill ETF Trust  vs.  SPDR SP Kensho

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.

SPDR SP Kensho

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Kensho are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, SPDR SP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Roundhill ETF and SPDR SP

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

The idea behind Roundhill ETF Trust and SPDR SP Kensho 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.