Correlation Between First Trust and Volatility Shares
Can any of the company-specific risk be diversified away by investing in both First Trust and Volatility Shares 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 First Trust and Volatility Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Indxx and Volatility Shares Trust, you can compare the effects of market volatilities on First Trust and Volatility Shares 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 First Trust with a short position of Volatility Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Volatility Shares.
Diversification Opportunities for First Trust and Volatility Shares
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between First and Volatility is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Indxx and Volatility Shares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volatility Shares Trust and First Trust 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 First Trust Indxx are associated (or correlated) with Volatility Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volatility Shares Trust has no effect on the direction of First Trust i.e., First Trust and Volatility Shares go up and down completely randomly.
Pair Corralation between First Trust and Volatility Shares
Given the investment horizon of 90 days First Trust is expected to generate 8.88 times less return on investment than Volatility Shares. But when comparing it to its historical volatility, First Trust Indxx is 7.7 times less risky than Volatility Shares. It trades about 0.08 of its potential returns per unit of risk. Volatility Shares Trust is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,324 in Volatility Shares Trust on August 28, 2024 and sell it today you would earn a total of 4,509 from holding Volatility Shares Trust or generate 340.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Indxx vs. Volatility Shares Trust
Performance |
| Timeline |
| First Trust Indxx |
| Volatility Shares Trust |
First Trust and Volatility Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Volatility Shares
The main advantage of trading using opposite First Trust and Volatility Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Volatility Shares 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 Volatility Shares will offset losses from the drop in Volatility Shares' long position.| First Trust vs. Siren Nasdaq NexGen | First Trust vs. Amplify Transformational Data | First Trust vs. Global X Blockchain | First Trust vs. VanEck Digital Transformation |
| Volatility Shares vs. Grayscale Bitcoin Trust | Volatility Shares vs. Grayscale Bitcoin Mini | Volatility Shares vs. First Trust SkyBridge |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |