Correlation Between Volatility Shares and IShares Morningstar

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

Diversification Opportunities for Volatility Shares and IShares Morningstar

0.32

Correlation Coefficient

Volatility Shares  IShares Morningstar

Weak diversification

The 3 months correlation between Volatility and IShares is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and iShares Morningstar Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Morningstar Value 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 IShares Morningstar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Morningstar Value has no effect on the direction of Volatility Shares i.e., Volatility Shares and IShares Morningstar go up and down completely randomly.

Pair Corralation between Volatility Shares and IShares Morningstar

Given the investment horizon of 90 days Volatility Shares Trust is expected to under-perform the IShares Morningstar. In addition to that, Volatility Shares is 7.75 times more volatile than iShares Morningstar Value. It trades about -0.07 of its total potential returns per unit of risk. iShares Morningstar Value is currently generating about 0.0 per unit of volatility. If you would invest  8,057  in iShares Morningstar Value on December 30, 2024 and sell it today you would earn a total of  0.00  from holding iShares Morningstar Value or generate 0.0% return on investment over 90 days.

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

Volatility Shares Trust  vs.  iShares Morningstar Value

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.

iShares Morningstar Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Morningstar Value has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, IShares Morningstar is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Volatility Shares and IShares Morningstar

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

The idea behind Volatility Shares Trust and iShares Morningstar Value 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.