Correlation Between Volatility Shares and JIB

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

Diversification Opportunities for Volatility Shares and JIB

-0.59

Correlation Coefficient

Volatility Shares  JIB

Excellent diversification

The 3 months correlation between Volatility and JIB is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and JIB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JIB 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 JIB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JIB has no effect on the direction of Volatility Shares i.e., Volatility Shares and JIB go up and down completely randomly.

Pair Corralation between Volatility Shares and JIB

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 21.42 times more return on investment than JIB. However, Volatility Shares is 21.42 times more volatile than JIB. It trades about 0.1 of its potential returns per unit of risk. JIB is currently generating about -0.01 per unit of risk. If you would invest  1,346  in Volatility Shares Trust on September 14, 2024 and sell it today you would earn a total of  4,901  from holding Volatility Shares Trust or generate 364.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	11.35%
Values	Daily Returns

Volatility Shares Trust  vs.  JIB

Volatility Shares Trust

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 20 (%) 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.

JIB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JIB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, JIB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Volatility Shares and JIB

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

The idea behind Volatility Shares Trust and JIB 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.