Correlation Between First Trust and Roundhill Video

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

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

Diversification Opportunities for First Trust and Roundhill Video

0.96

Correlation Coefficient

First Trust  Roundhill Video

Almost no diversification

The 3 months correlation between First and Roundhill is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Cloud and Roundhill Video Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Video Games and First Trust 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 First Trust Cloud are associated (or correlated) with Roundhill Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Video Games has no effect on the direction of First Trust i.e., First Trust and Roundhill Video go up and down completely randomly.

Pair Corralation between First Trust and Roundhill Video

Given the investment horizon of 90 days First Trust Cloud is expected to generate 1.1 times more return on investment than Roundhill Video. However, First Trust is 1.1 times more volatile than Roundhill Video Games. It trades about 0.16 of its potential returns per unit of risk. Roundhill Video Games is currently generating about 0.16 per unit of risk. If you would invest  9,191  in First Trust Cloud on September 22, 2024 and sell it today you would earn a total of  3,131  from holding First Trust Cloud or generate 34.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.22%
Values	Daily Returns

First Trust Cloud  vs.  Roundhill Video Games

First Trust Cloud

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Cloud are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, First Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Roundhill Video Games

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Video Games are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Roundhill Video exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Trust and Roundhill Video

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

The idea behind First Trust Cloud and Roundhill Video Games 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.