Correlation Between Volatility Shares and First Trust
Can any of the company-specific risk be diversified away by investing in both Volatility Shares and First Trust 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 First Trust 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 First Trust TCW, you can compare the effects of market volatilities on Volatility Shares and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and First Trust.
Diversification Opportunities for Volatility Shares and First Trust
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volatility and First is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and First Trust TCW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust TCW 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust TCW has no effect on the direction of Volatility Shares i.e., Volatility Shares and First Trust go up and down completely randomly.
Pair Corralation between Volatility Shares and First Trust
Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 22.84 times more return on investment than First Trust. However, Volatility Shares is 22.84 times more volatile than First Trust TCW. It trades about 0.46 of its potential returns per unit of risk. First Trust TCW is currently generating about -0.17 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 Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volatility Shares Trust vs. First Trust TCW
Performance |
| Timeline |
| Volatility Shares Trust |
| First Trust TCW |
Volatility Shares and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volatility Shares and First Trust
The main advantage of trading using opposite Volatility Shares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volatility Shares position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Volatility Shares vs. ProShares Bitcoin Strategy | Volatility Shares vs. Bitwise 10 Crypto | Volatility Shares vs. Global X Blockchain |
| First Trust vs. Fidelity Total Bond | First Trust vs. Hartford Total Return | First Trust vs. JPMorgan Core Plus | First Trust vs. Vident Core Bond |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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