Correlation Between IShares Global and Roundhill Cannabis

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

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

Diversification Opportunities for IShares Global and Roundhill Cannabis

0.66

Correlation Coefficient

IShares Global  Roundhill Cannabis

Poor diversification

The 3 months correlation between IShares and Roundhill is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Clean and Roundhill Cannabis ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Cannabis ETF and IShares Global 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 iShares Global Clean are associated (or correlated) with Roundhill Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Cannabis ETF has no effect on the direction of IShares Global i.e., IShares Global and Roundhill Cannabis go up and down completely randomly.

Pair Corralation between IShares Global and Roundhill Cannabis

Given the investment horizon of 90 days iShares Global Clean is expected to generate 0.26 times more return on investment than Roundhill Cannabis. However, iShares Global Clean is 3.78 times less risky than Roundhill Cannabis. It trades about -0.14 of its potential returns per unit of risk. Roundhill Cannabis ETF is currently generating about -0.05 per unit of risk. If you would invest  1,429  in iShares Global Clean on August 30, 2024 and sell it today you would lose (194.00) from holding iShares Global Clean or give up 13.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

iShares Global Clean  vs.  Roundhill Cannabis ETF

iShares Global Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Clean 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 essential indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Roundhill Cannabis ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roundhill Cannabis ETF 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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with IShares Global and Roundhill Cannabis

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

The idea behind iShares Global Clean and Roundhill Cannabis ETF 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 Global Correlations module to find global opportunities by holding instruments from different markets.