Correlation Between Volatility Shares and Schwab Fundamental

Can any of the company-specific risk be diversified away by investing in both Volatility Shares and Schwab Fundamental 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 Schwab Fundamental 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 Schwab Fundamental International, you can compare the effects of market volatilities on Volatility Shares and Schwab Fundamental 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 Schwab Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and Schwab Fundamental.

Diversification Opportunities for Volatility Shares and Schwab Fundamental

-0.78

Correlation Coefficient

Volatility Shares  Schwab Fundamental

Pay attention - limited upside

The 3 months correlation between Volatility and Schwab is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Schwab Fundamental Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental 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 Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental has no effect on the direction of Volatility Shares i.e., Volatility Shares and Schwab Fundamental go up and down completely randomly.

Pair Corralation between Volatility Shares and Schwab Fundamental

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 8.4 times more return on investment than Schwab Fundamental. However, Volatility Shares is 8.4 times more volatile than Schwab Fundamental International. It trades about 0.25 of its potential returns per unit of risk. Schwab Fundamental International is currently generating about -0.05 per unit of risk. If you would invest  2,386  in Volatility Shares Trust on September 3, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Volatility Shares Trust  vs.  Schwab Fundamental Internation

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 unsteady basic indicators, Volatility Shares showed solid returns over the last few months and may actually be approaching a breakup point.

Schwab Fundamental

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Volatility Shares and Schwab Fundamental

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

The idea behind Volatility Shares Trust and Schwab Fundamental International 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.