Correlation Between Volatility Shares and WisdomTree International

Can any of the company-specific risk be diversified away by investing in both Volatility Shares and WisdomTree International 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 Volatility Shares and WisdomTree International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Volatility Shares Trust and WisdomTree International Equity, you can compare the effects of market volatilities on Volatility Shares and WisdomTree International 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 Volatility Shares with a short position of WisdomTree International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and WisdomTree International.

Diversification Opportunities for Volatility Shares and WisdomTree International

-0.82

Correlation Coefficient

Volatility Shares  WisdomTree International

Pay attention - limited upside

The 3 months correlation between Volatility and WisdomTree is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and WisdomTree International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree International and Volatility Shares 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 Volatility Shares Trust are associated (or correlated) with WisdomTree International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree International has no effect on the direction of Volatility Shares i.e., Volatility Shares and WisdomTree International go up and down completely randomly.

Pair Corralation between Volatility Shares and WisdomTree International

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 8.62 times more return on investment than WisdomTree International. However, Volatility Shares is 8.62 times more volatile than WisdomTree International Equity. It trades about 0.25 of its potential returns per unit of risk. WisdomTree International Equity is currently generating about -0.05 per unit of risk. If you would invest  2,386  in Volatility Shares Trust on September 2, 2024 and sell it today you would earn a total of  3,634  from holding Volatility Shares Trust or generate 152.31% return on investment over 90 days.

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

Volatility Shares Trust  vs.  WisdomTree International Equit

Volatility Shares Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Volatility Shares showed solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, WisdomTree International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Volatility Shares and WisdomTree International

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

The idea behind Volatility Shares Trust and WisdomTree International Equity 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..