Correlation Between Volatility Shares and Pacer Benchmark

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

Diversification Opportunities for Volatility Shares and Pacer Benchmark

-0.82

Correlation Coefficient

Volatility Shares  Pacer Benchmark

Pay attention - limited upside

The 3 months correlation between Volatility and Pacer is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Pacer Benchmark Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer Benchmark Indu 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 Pacer Benchmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Benchmark Indu has no effect on the direction of Volatility Shares i.e., Volatility Shares and Pacer Benchmark go up and down completely randomly.

Pair Corralation between Volatility Shares and Pacer Benchmark

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 6.76 times more return on investment than Pacer Benchmark. However, Volatility Shares is 6.76 times more volatile than Pacer Benchmark Industrial. It trades about 0.25 of its potential returns per unit of risk. Pacer Benchmark Industrial is currently generating about -0.23 per unit of risk. If you would invest  2,498  in Volatility Shares Trust on September 13, 2024 and sell it today you would earn a total of  3,749  from holding Volatility Shares Trust or generate 150.08% return on investment over 90 days.

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

Volatility Shares Trust  vs.  Pacer Benchmark Industrial

Volatility Shares Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 19 (%) 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.

Pacer Benchmark Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pacer Benchmark Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Volatility Shares and Pacer Benchmark

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

The idea behind Volatility Shares Trust and Pacer Benchmark Industrial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.