Correlation Between Roundhill ETF and Vanguard

Can any of the company-specific risk be diversified away by investing in both Roundhill ETF and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on Roundhill ETF and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Roundhill ETF and Vanguard.

Diversification Opportunities for Roundhill ETF and Vanguard

0.91

Correlation Coefficient

Roundhill ETF  Vanguard

Almost no diversification

The 3 months correlation between Roundhill and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill ETF Trust and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard SP 500 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Roundhill ETF i.e., Roundhill ETF and Vanguard go up and down completely randomly.

Pair Corralation between Roundhill ETF and Vanguard

Given the investment horizon of 90 days Roundhill ETF is expected to generate 1.58 times less return on investment than Vanguard. In addition to that, Roundhill ETF is 1.37 times more volatile than Vanguard SP 500. It trades about 0.05 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.11 per unit of volatility. If you would invest  34,751  in Vanguard SP 500 on December 4, 2024 and sell it today you would earn a total of  18,294  from holding Vanguard SP 500 or generate 52.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	50.2%
Values	Daily Returns

Roundhill ETF Trust  vs.  Vanguard SP 500

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.

Vanguard SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Roundhill ETF and Vanguard

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

The idea behind Roundhill ETF Trust and Vanguard SP 500 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.