Correlation Between Volatility Shares and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Volatility Shares and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Volatility Shares and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and Dow Jones.
Diversification Opportunities for Volatility Shares and Dow Jones
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Volatility and Dow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Volatility Shares i.e., Volatility Shares and Dow Jones go up and down completely randomly.
Pair Corralation between Volatility Shares and Dow Jones
Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 8.38 times more return on investment than Dow Jones. However, Volatility Shares is 8.38 times more volatile than Dow Jones Industrial. It trades about 0.45 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.15 per unit of risk. If you would invest 3,002 in Volatility Shares Trust on August 24, 2024 and sell it today you would earn a total of 3,285 from holding Volatility Shares Trust or generate 109.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volatility Shares Trust vs. Dow Jones Industrial
Performance |
| Timeline |
Volatility Shares and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Volatility Shares Trust
Pair trading matchups for Volatility Shares
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Volatility Shares and Dow Jones
The main advantage of trading using opposite Volatility Shares and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volatility Shares position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Volatility Shares vs. Grayscale Bitcoin Trust | Volatility Shares vs. ProShares Bitcoin Strategy | Volatility Shares vs. Amplify Transformational Data | Volatility Shares vs. Siren Nasdaq NexGen |
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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