Correlation Between SPDR SP and Volatility Shares
Can any of the company-specific risk be diversified away by investing in both SPDR SP 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 SPDR SP and Volatility Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP 500 and Volatility Shares Trust, you can compare the effects of market volatilities on SPDR SP 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 SPDR SP with a short position of Volatility Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Volatility Shares.
Diversification Opportunities for SPDR SP and Volatility Shares
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SPDR and Volatility is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP 500 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 SPDR SP 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 SPDR SP 500 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 SPDR SP i.e., SPDR SP and Volatility Shares go up and down completely randomly.
Pair Corralation between SPDR SP and Volatility Shares
Considering the 90-day investment horizon SPDR SP is expected to generate 42.47 times less return on investment than Volatility Shares. But when comparing it to its historical volatility, SPDR SP 500 is 9.36 times less risky than Volatility Shares. It trades about 0.09 of its potential returns per unit of risk. Volatility Shares Trust is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 3,104 in Volatility Shares Trust on August 23, 2024 and sell it today you would earn a total of 3,183 from holding Volatility Shares Trust or generate 102.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP 500 vs. Volatility Shares Trust
Performance |
| Timeline |
| SPDR SP 500 |
| Volatility Shares Trust |
SPDR SP and Volatility Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Volatility Shares
The main advantage of trading using opposite SPDR SP and Volatility Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP 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.| SPDR SP vs. SPDR Gold Shares | SPDR SP vs. Vanguard Real Estate | SPDR SP vs. Vanguard Total Stock | SPDR SP vs. Vanguard FTSE Emerging |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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