Correlation Between Volatility Shares and Innovator ETFs

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

Diversification Opportunities for Volatility Shares and Innovator ETFs

-0.79

Correlation Coefficient

Volatility Shares  Innovator ETFs

Pay attention - limited upside

The 3 months correlation between Volatility and Innovator is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Innovator ETFs Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator ETFs 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 Innovator ETFs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator ETFs Trust has no effect on the direction of Volatility Shares i.e., Volatility Shares and Innovator ETFs go up and down completely randomly.

Pair Corralation between Volatility Shares and Innovator ETFs

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 11.57 times more return on investment than Innovator ETFs. However, Volatility Shares is 11.57 times more volatile than Innovator ETFs Trust. It trades about 0.1 of its potential returns per unit of risk. Innovator ETFs Trust is currently generating about 0.06 per unit of risk. If you would invest  2,010  in Volatility Shares Trust on September 13, 2024 and sell it today you would earn a total of  4,425  from holding Volatility Shares Trust or generate 220.15% return on investment over 90 days.

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

Volatility Shares Trust  vs.  Innovator ETFs 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.

Innovator ETFs Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovator ETFs Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Innovator ETFs is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Volatility Shares and Innovator ETFs

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

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