Correlation Between Volatility Shares and SPDR SSGA

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

Diversification Opportunities for Volatility Shares and SPDR SSGA

-0.56

Correlation Coefficient

Volatility Shares  SPDR SSGA

Excellent diversification

The 3 months correlation between Volatility and SPDR is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and SPDR SSGA Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Fixed 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Fixed has no effect on the direction of Volatility Shares i.e., Volatility Shares and SPDR SSGA go up and down completely randomly.

Pair Corralation between Volatility Shares and SPDR SSGA

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 18.44 times more return on investment than SPDR SSGA. However, Volatility Shares is 18.44 times more volatile than SPDR SSGA Fixed. It trades about 0.24 of its potential returns per unit of risk. SPDR SSGA Fixed is currently generating about 0.07 per unit of risk. If you would invest  5,388  in Volatility Shares Trust on September 19, 2024 and sell it today you would earn a total of  1,667  from holding Volatility Shares Trust or generate 30.94% return on investment over 90 days.

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

Volatility Shares Trust  vs.  SPDR SSGA Fixed

Volatility Shares Trust

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Volatility Shares showed solid returns over the last few months and may actually be approaching a breakup point.

SPDR SSGA Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SSGA Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SPDR SSGA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Volatility Shares and SPDR SSGA

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

The idea behind Volatility Shares Trust and SPDR SSGA Fixed 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.