Correlation Between Volatility Shares and Global X

Can any of the company-specific risk be diversified away by investing in both Volatility Shares and Global X 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 Global X 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 Global X MSCI, you can compare the effects of market volatilities on Volatility Shares and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and Global X.

Diversification Opportunities for Volatility Shares and Global X

-0.7

Correlation Coefficient

Volatility Shares  Global X

Excellent diversification

The 3 months correlation between Volatility and Global is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of Volatility Shares i.e., Volatility Shares and Global X go up and down completely randomly.

Pair Corralation between Volatility Shares and Global X

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 2.66 times more return on investment than Global X. However, Volatility Shares is 2.66 times more volatile than Global X MSCI. It trades about 0.2 of its potential returns per unit of risk. Global X MSCI is currently generating about -0.14 per unit of risk. If you would invest  2,722  in Volatility Shares Trust on October 7, 2024 and sell it today you would earn a total of  3,047  from holding Volatility Shares Trust or generate 111.94% 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.  Global X MSCI

Volatility Shares Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Volatility Shares showed solid returns over the last few months and may actually be approaching a breakup point.

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's forward indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Volatility Shares and Global X

The main advantage of trading using opposite Volatility Shares and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volatility Shares position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.

The idea behind Volatility Shares Trust and Global X MSCI 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.