Correlation Between Volatility Shares and T Rex

Can any of the company-specific risk be diversified away by investing in both Volatility Shares and T Rex 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 T Rex 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 T Rex 2X Long, you can compare the effects of market volatilities on Volatility Shares and T Rex 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 T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volatility Shares and T Rex.

Diversification Opportunities for Volatility Shares and T Rex

0.73

Correlation Coefficient

Volatility Shares  T Rex

Poor diversification

The 3 months correlation between Volatility and NVDX is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and T Rex 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X 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 T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of Volatility Shares i.e., Volatility Shares and T Rex go up and down completely randomly.

Pair Corralation between Volatility Shares and T Rex

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 0.73 times more return on investment than T Rex. However, Volatility Shares Trust is 1.38 times less risky than T Rex. It trades about -0.07 of its potential returns per unit of risk. T Rex 2X Long is currently generating about -0.07 per unit of risk. If you would invest  5,205  in Volatility Shares Trust on December 29, 2024 and sell it today you would lose (1,551) from holding Volatility Shares Trust or give up 29.8% of portfolio value over 90 days.

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

Volatility Shares Trust  vs.  T Rex 2X Long

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.

T Rex 2X

Risk-Adjusted Performance

Very Weak

Over the last 90 days T Rex 2X Long 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 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.

Pair Trading with Volatility Shares and T Rex

The main advantage of trading using opposite Volatility Shares and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volatility Shares position performs unexpectedly, T Rex 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 T Rex will offset losses from the drop in T Rex's long position.

The idea behind Volatility Shares Trust and T Rex 2X Long 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.