Correlation Between Volatility Shares and MicroSectorsTM Oil

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

Diversification Opportunities for Volatility Shares and MicroSectorsTM Oil

-0.73

Correlation Coefficient

Volatility Shares  MicroSectorsTM Oil

Pay attention - limited upside

The 3 months correlation between Volatility and MicroSectorsTM is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas 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 MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of Volatility Shares i.e., Volatility Shares and MicroSectorsTM Oil go up and down completely randomly.

Pair Corralation between Volatility Shares and MicroSectorsTM Oil

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 1.81 times more return on investment than MicroSectorsTM Oil. However, Volatility Shares is 1.81 times more volatile than MicroSectorsTM Oil Gas. It trades about 0.24 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.04 per unit of risk. If you would invest  2,438  in Volatility Shares Trust on August 30, 2024 and sell it today you would earn a total of  3,526  from holding Volatility Shares Trust or generate 144.63% 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.  MicroSectorsTM Oil Gas

Volatility Shares Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 18 (%) 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.

MicroSectorsTM Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectorsTM Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Volatility Shares and MicroSectorsTM Oil

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

The idea behind Volatility Shares Trust and MicroSectorsTM Oil Gas 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.