Correlation Between Volatility Shares and Vanguard Total

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

Diversification Opportunities for Volatility Shares and Vanguard Total

-0.41

Correlation Coefficient

Volatility Shares  Vanguard Total

Very good diversification

The 3 months correlation between Volatility and Vanguard is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and Vanguard Total Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Corporate 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Corporate has no effect on the direction of Volatility Shares i.e., Volatility Shares and Vanguard Total go up and down completely randomly.

Pair Corralation between Volatility Shares and Vanguard Total

Given the investment horizon of 90 days Volatility Shares Trust is expected to under-perform the Vanguard Total. In addition to that, Volatility Shares is 14.6 times more volatile than Vanguard Total Corporate. It trades about -0.31 of its total potential returns per unit of risk. Vanguard Total Corporate is currently generating about 0.27 per unit of volatility. If you would invest  7,563  in Vanguard Total Corporate on December 5, 2024 and sell it today you would earn a total of  145.00  from holding Vanguard Total Corporate or generate 1.92% return on investment over 90 days.

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

Volatility Shares Trust  vs.  Vanguard Total Corporate

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.

Vanguard Total Corporate

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Corporate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Volatility Shares and Vanguard Total

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

The idea behind Volatility Shares Trust and Vanguard Total Corporate 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.