Correlation Between Volatility Shares and EA Series

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

Diversification Opportunities for Volatility Shares and EA Series

0.83

Correlation Coefficient

Volatility Shares  EA Series

Very poor diversification

The 3 months correlation between Volatility and STRV is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series 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 EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Volatility Shares i.e., Volatility Shares and EA Series go up and down completely randomly.

Pair Corralation between Volatility Shares and EA Series

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 11.37 times more return on investment than EA Series. However, Volatility Shares is 11.37 times more volatile than EA Series Trust. It trades about 0.39 of its potential returns per unit of risk. EA Series Trust is currently generating about 0.36 per unit of risk. If you would invest  3,194  in Volatility Shares Trust on September 2, 2024 and sell it today you would earn a total of  2,826  from holding Volatility Shares Trust or generate 88.48% return on investment over 90 days.

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

Volatility Shares Trust  vs.  EA Series Trust

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 inconsistent basic indicators, Volatility Shares showed solid returns over the last few months and may actually be approaching a breakup point.

EA Series Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EA Series Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, EA Series may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Volatility Shares and EA Series

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

The idea behind Volatility Shares Trust and EA Series 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.

Check out your portfolio center.

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.