Correlation Between Roundhill Investments and SSgA SPDR

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

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

Diversification Opportunities for Roundhill Investments and SSgA SPDR

-0.71

Correlation Coefficient

Roundhill Investments  SSgA SPDR

Pay attention - limited upside

The 3 months correlation between Roundhill and SSgA is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Roundhill Investments and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and Roundhill Investments 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 Investments are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Roundhill Investments i.e., Roundhill Investments and SSgA SPDR go up and down completely randomly.

Pair Corralation between Roundhill Investments and SSgA SPDR

Given the investment horizon of 90 days Roundhill Investments is expected to generate 1.69 times more return on investment than SSgA SPDR. However, Roundhill Investments is 1.69 times more volatile than SSgA SPDR ETFs. It trades about 0.14 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.02 per unit of risk. If you would invest  2,613  in Roundhill Investments on September 30, 2024 and sell it today you would earn a total of  1,453  from holding Roundhill Investments or generate 55.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	29.5%
Values	Daily Returns

Roundhill Investments  vs.  SSgA SPDR ETFs

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

SSgA SPDR ETFs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSgA SPDR ETFs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, SSgA SPDR is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Roundhill Investments and SSgA SPDR

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

The idea behind Roundhill Investments and SSgA SPDR ETFs 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.