Correlation Between Roundhill ETF and Global X

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

Diversification Opportunities for Roundhill ETF and Global X

0.81

Correlation Coefficient

Roundhill ETF  Global X

Very poor diversification

The 3 months correlation between Roundhill and Global is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill ETF Trust and Global X NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X NASDAQ 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X NASDAQ has no effect on the direction of Roundhill ETF i.e., Roundhill ETF and Global X go up and down completely randomly.

Pair Corralation between Roundhill ETF and Global X

Given the investment horizon of 90 days Roundhill ETF Trust is expected to under-perform the Global X. In addition to that, Roundhill ETF is 1.66 times more volatile than Global X NASDAQ. It trades about -0.07 of its total potential returns per unit of risk. Global X NASDAQ is currently generating about -0.11 per unit of volatility. If you would invest  2,943  in Global X NASDAQ on December 28, 2024 and sell it today you would lose (157.00) from holding Global X NASDAQ or give up 5.33% of portfolio value over 90 days.

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

Roundhill ETF Trust  vs.  Global X NASDAQ

Roundhill ETF Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Roundhill ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Roundhill ETF is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Global X NASDAQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X NASDAQ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Global X is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Roundhill ETF and Global X

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

The idea behind Roundhill ETF Trust and Global X NASDAQ 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.