Correlation Between ETC 6 and Two Roads

Can any of the company-specific risk be diversified away by investing in both ETC 6 and Two Roads 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 ETC 6 and Two Roads into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETC 6 Meridian and Two Roads Shared, you can compare the effects of market volatilities on ETC 6 and Two Roads 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 ETC 6 with a short position of Two Roads. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETC 6 and Two Roads.

Diversification Opportunities for ETC 6 and Two Roads

0.23

Correlation Coefficient

ETC 6  Two Roads

Modest diversification

The 3 months correlation between ETC and Two is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding ETC 6 Meridian and Two Roads Shared in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Two Roads Shared and ETC 6 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 ETC 6 Meridian are associated (or correlated) with Two Roads. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Two Roads Shared has no effect on the direction of ETC 6 i.e., ETC 6 and Two Roads go up and down completely randomly.

Pair Corralation between ETC 6 and Two Roads

Given the investment horizon of 90 days ETC 6 is expected to generate 15.76 times less return on investment than Two Roads. But when comparing it to its historical volatility, ETC 6 Meridian is 1.72 times less risky than Two Roads. It trades about 0.02 of its potential returns per unit of risk. Two Roads Shared is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,057  in Two Roads Shared on May 1, 2025 and sell it today you would earn a total of  331.00  from holding Two Roads Shared or generate 10.83% return on investment over 90 days.

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

ETC 6 Meridian  vs.  Two Roads Shared

ETC 6 Meridian

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETC 6 Meridian are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, ETC 6 is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Two Roads Shared

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Two Roads Shared are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Two Roads may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with ETC 6 and Two Roads

The main advantage of trading using opposite ETC 6 and Two Roads positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETC 6 position performs unexpectedly, Two Roads 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 Two Roads will offset losses from the drop in Two Roads' long position.

The idea behind ETC 6 Meridian and Two Roads Shared 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.