Correlation Between Innovator Russell and Roundhill ETF

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

By analyzing existing cross correlation between Innovator Russell 2000 and Roundhill ETF Trust, you can compare the effects of market volatilities on Innovator Russell 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 Innovator Russell with a short position of Roundhill ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator Russell and Roundhill ETF.

Diversification Opportunities for Innovator Russell and Roundhill ETF

-0.28

Correlation Coefficient

Innovator Russell  Roundhill ETF

Very good diversification

The 3 months correlation between Innovator and Roundhill is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Russell 2000 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 Innovator Russell 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 Innovator Russell 2000 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 Innovator Russell i.e., Innovator Russell and Roundhill ETF go up and down completely randomly.

Pair Corralation between Innovator Russell and Roundhill ETF

Given the investment horizon of 90 days Innovator Russell 2000 is expected to generate 0.92 times more return on investment than Roundhill ETF. However, Innovator Russell 2000 is 1.09 times less risky than Roundhill ETF. It trades about 0.19 of its potential returns per unit of risk. Roundhill ETF Trust is currently generating about -0.04 per unit of risk. If you would invest  2,844  in Innovator Russell 2000 on September 2, 2024 and sell it today you would earn a total of  189.00  from holding Innovator Russell 2000 or generate 6.65% return on investment over 90 days.

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

Innovator Russell 2000  vs.  Roundhill ETF Trust

Innovator Russell 2000

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Russell 2000 are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Innovator Russell may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Roundhill ETF Trust

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, Roundhill ETF is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Innovator Russell and Roundhill ETF

The main advantage of trading using opposite Innovator Russell and Roundhill ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator Russell 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 Innovator Russell 2000 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.