Correlation Between Volatility Shares and Grayscale Bitcoin

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

Diversification Opportunities for Volatility Shares and Grayscale Bitcoin

1.0

Correlation Coefficient

Volatility Shares  Grayscale Bitcoin

No risk reduction

The 3 months correlation between Volatility and Grayscale is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Grayscale Bitcoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Bitcoin Trust 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 Grayscale Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Bitcoin Trust has no effect on the direction of Volatility Shares i.e., Volatility Shares and Grayscale Bitcoin go up and down completely randomly.

Pair Corralation between Volatility Shares and Grayscale Bitcoin

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 2.02 times more return on investment than Grayscale Bitcoin. However, Volatility Shares is 2.02 times more volatile than Grayscale Bitcoin Trust. It trades about 0.26 of its potential returns per unit of risk. Grayscale Bitcoin Trust is currently generating about 0.28 per unit of risk. If you would invest  2,344  in Volatility Shares Trust on September 14, 2024 and sell it today you would earn a total of  3,903  from holding Volatility Shares Trust or generate 166.51% return on investment over 90 days.

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

Volatility Shares Trust  vs.  Grayscale Bitcoin Trust

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.

Grayscale Bitcoin Trust

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volatility Shares and Grayscale Bitcoin

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

The idea behind Volatility Shares Trust and Grayscale Bitcoin Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.