Correlation Between Roundhill Magnificent and American Century

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

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

Diversification Opportunities for Roundhill Magnificent and American Century

-0.49

Correlation Coefficient

Roundhill Magnificent  American Century

Very good diversification

The 3 months correlation between Roundhill and American is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Magnificent Seven and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF and Roundhill Magnificent 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 Roundhill Magnificent Seven are associated (or correlated) with American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of Roundhill Magnificent i.e., Roundhill Magnificent and American Century go up and down completely randomly.

Pair Corralation between Roundhill Magnificent and American Century

Given the investment horizon of 90 days Roundhill Magnificent Seven is expected to generate 1.78 times more return on investment than American Century. However, Roundhill Magnificent is 1.78 times more volatile than American Century ETF. It trades about 0.15 of its potential returns per unit of risk. American Century ETF is currently generating about -0.07 per unit of risk. If you would invest  4,464  in Roundhill Magnificent Seven on August 30, 2024 and sell it today you would earn a total of  636.00  from holding Roundhill Magnificent Seven or generate 14.25% return on investment over 90 days.

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

Roundhill Magnificent Seven  vs.  American Century ETF

Roundhill Magnificent

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Magnificent Seven are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Roundhill Magnificent unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Century ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, American Century is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Roundhill Magnificent and American Century

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

The idea behind Roundhill Magnificent Seven and American Century 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.

Check out your portfolio center.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.