Correlation Between Volatility Shares and VanEck Digital

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

Diversification Opportunities for Volatility Shares and VanEck Digital

0.95

Correlation Coefficient

Volatility Shares  VanEck Digital

Almost no diversification

The 3 months correlation between Volatility and VanEck is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and VanEck Digital Transformation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Digital Trans 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 VanEck Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Digital Trans has no effect on the direction of Volatility Shares i.e., Volatility Shares and VanEck Digital go up and down completely randomly.

Pair Corralation between Volatility Shares and VanEck Digital

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 1.31 times more return on investment than VanEck Digital. However, Volatility Shares is 1.31 times more volatile than VanEck Digital Transformation. It trades about -0.07 of its potential returns per unit of risk. VanEck Digital Transformation is currently generating about -0.14 per unit of risk. If you would invest  5,205  in Volatility Shares Trust on December 30, 2024 and sell it today you would lose (1,551) from holding Volatility Shares Trust or give up 29.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Volatility Shares Trust  vs.  VanEck Digital Transformation

Volatility Shares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volatility Shares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

VanEck Digital Trans

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Digital Transformation 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 basic indicators remain relatively invariable which may send shares a bit higher in April 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 VanEck Digital

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

The idea behind Volatility Shares Trust and VanEck Digital Transformation 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.