Correlation Between Volatility Shares and GraniteShares XOUT
Can any of the company-specific risk be diversified away by investing in both Volatility Shares and GraniteShares XOUT 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 GraniteShares XOUT 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 GraniteShares XOUT Large, you can compare the effects of market volatilities on Volatility Shares and GraniteShares XOUT 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 GraniteShares XOUT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and GraniteShares XOUT.
Diversification Opportunities for Volatility Shares and GraniteShares XOUT
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Volatility and GraniteShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and GraniteShares XOUT Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares XOUT Large 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 GraniteShares XOUT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares XOUT Large has no effect on the direction of Volatility Shares i.e., Volatility Shares and GraniteShares XOUT go up and down completely randomly.
Pair Corralation between Volatility Shares and GraniteShares XOUT
Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 7.11 times more return on investment than GraniteShares XOUT. However, Volatility Shares is 7.11 times more volatile than GraniteShares XOUT Large. It trades about 0.38 of its potential returns per unit of risk. GraniteShares XOUT Large is currently generating about 0.28 per unit of risk. If you would invest 3,270 in Volatility Shares Trust on September 1, 2024 and sell it today you would earn a total of 2,750 from holding Volatility Shares Trust or generate 84.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Volatility Shares Trust vs. GraniteShares XOUT Large
Performance |
| Timeline |
| Volatility Shares Trust |
| GraniteShares XOUT Large |
Volatility Shares and GraniteShares XOUT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volatility Shares and GraniteShares XOUT
The main advantage of trading using opposite Volatility Shares and GraniteShares XOUT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volatility Shares position performs unexpectedly, GraniteShares XOUT 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 GraniteShares XOUT will offset losses from the drop in GraniteShares XOUT's long position.The idea behind Volatility Shares Trust and GraniteShares XOUT Large 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.| GraniteShares XOUT vs. GraniteShares HIPS High | GraniteShares XOUT vs. SoFi Social 50 | GraniteShares XOUT vs. Invesco SP 500 | GraniteShares XOUT vs. GraniteShares Bloomberg Commodity |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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