Correlation Between Volatility Shares and ProShares VIX

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

Diversification Opportunities for Volatility Shares and ProShares VIX

-0.73

Correlation Coefficient

Volatility Shares  ProShares VIX

Pay attention - limited upside

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

Pair Corralation between Volatility Shares and ProShares VIX

Given the investment horizon of 90 days Volatility Shares Trust is expected to under-perform the ProShares VIX. In addition to that, Volatility Shares is 1.44 times more volatile than ProShares VIX Short Term. It trades about -0.07 of its total potential returns per unit of risk. ProShares VIX Short Term is currently generating about 0.07 per unit of volatility. If you would invest  4,473  in ProShares VIX Short Term on December 30, 2024 and sell it today you would earn a total of  575.00  from holding ProShares VIX Short Term or generate 12.85% 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.  ProShares VIX Short Term

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.

ProShares VIX Short

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares VIX Short Term are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ProShares VIX showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Volatility Shares and ProShares VIX

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

The idea behind Volatility Shares Trust and ProShares VIX Short Term 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.