Correlation Between Invesco NASDAQ and Roundhill Investments

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

By analyzing existing cross correlation between Invesco NASDAQ 100 and Roundhill Investments, you can compare the effects of market volatilities on Invesco NASDAQ and Roundhill Investments 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 Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco NASDAQ and Roundhill Investments.

Diversification Opportunities for Invesco NASDAQ and Roundhill Investments

0.0

Correlation Coefficient

Invesco NASDAQ  Roundhill Investments

Pay attention - limited upside

The 3 months correlation between Invesco and Roundhill is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Invesco NASDAQ 100 and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments 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 100 are associated (or correlated) with Roundhill Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Investments has no effect on the direction of Invesco NASDAQ i.e., Invesco NASDAQ and Roundhill Investments go up and down completely randomly.

Pair Corralation between Invesco NASDAQ and Roundhill Investments

Given the investment horizon of 90 days Invesco NASDAQ is expected to generate 2.21 times less return on investment than Roundhill Investments. But when comparing it to its historical volatility, Invesco NASDAQ 100 is 2.2 times less risky than Roundhill Investments. It trades about 0.11 of its potential returns per unit of risk. Roundhill Investments is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,135  in Roundhill Investments on October 3, 2024 and sell it today you would earn a total of  931.00  from holding Roundhill Investments or generate 29.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	23.58%
Values	Daily Returns

Invesco NASDAQ 100  vs.  Roundhill Investments

Invesco NASDAQ 100

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco NASDAQ 100 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish basic indicators, Invesco NASDAQ may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Roundhill Investments

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Invesco NASDAQ and Roundhill Investments

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

The idea behind Invesco NASDAQ 100 and Roundhill Investments 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.