Correlation Between MicroSectors FANG and Roundhill Investments

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

By analyzing existing cross correlation between MicroSectors FANG Index and Roundhill Investments, you can compare the effects of market volatilities on MicroSectors FANG 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 MicroSectors FANG with a short position of Roundhill Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Roundhill Investments.

Diversification Opportunities for MicroSectors FANG and Roundhill Investments

-0.47

Correlation Coefficient

MicroSectors FANG  Roundhill Investments

Very good diversification

The 3 months correlation between MicroSectors and Roundhill is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Roundhill Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Investments and MicroSectors FANG 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 MicroSectors FANG Index 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 MicroSectors FANG i.e., MicroSectors FANG and Roundhill Investments go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Roundhill Investments

If you would invest  976.00  in Roundhill Investments on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Roundhill Investments or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.54%
Values	Daily Returns

MicroSectors FANG Index  vs.  Roundhill Investments

MicroSectors FANG Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors FANG Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

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 basic indicators, Roundhill Investments is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MicroSectors FANG and Roundhill Investments

The main advantage of trading using opposite MicroSectors FANG and Roundhill Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG 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 MicroSectors FANG Index 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.