Correlation Between Vanguard Total and Roundhill ETF

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

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

Diversification Opportunities for Vanguard Total and Roundhill ETF

0.86

Correlation Coefficient

Vanguard Total  Roundhill ETF

Very poor diversification

The 3 months correlation between Vanguard and Roundhill is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total Stock and Roundhill ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill ETF Trust and Vanguard Total 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 Vanguard Total Stock are associated (or correlated) with Roundhill ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill ETF Trust has no effect on the direction of Vanguard Total i.e., Vanguard Total and Roundhill ETF go up and down completely randomly.

Pair Corralation between Vanguard Total and Roundhill ETF

Considering the 90-day investment horizon Vanguard Total Stock is expected to under-perform the Roundhill ETF. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Total Stock is 1.27 times less risky than Roundhill ETF. The etf trades about -0.04 of its potential returns per unit of risk. The Roundhill ETF Trust is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,865  in Roundhill ETF Trust on November 28, 2024 and sell it today you would lose (11.00) from holding Roundhill ETF Trust or give up 0.28% of portfolio value over 90 days.

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

Vanguard Total Stock  vs.  Roundhill ETF Trust

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.

Pair Trading with Vanguard Total and Roundhill ETF

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

The idea behind Vanguard Total Stock and Roundhill ETF Trust 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.