Correlation Between Volatility Shares and UBS ETRACS

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

Diversification Opportunities for Volatility Shares and UBS ETRACS

0.07

Correlation Coefficient

Volatility Shares  UBS ETRACS

Significant diversification

The 3 months correlation between Volatility and UBS is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS 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 UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of Volatility Shares i.e., Volatility Shares and UBS ETRACS go up and down completely randomly.

Pair Corralation between Volatility Shares and UBS ETRACS

Given the investment horizon of 90 days Volatility Shares Trust is expected to under-perform the UBS ETRACS. But the etf apears to be less risky and, when comparing its historical volatility, Volatility Shares Trust is 1.26 times less risky than UBS ETRACS. The etf trades about -0.07 of its potential returns per unit of risk. The UBS ETRACS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,185  in UBS ETRACS on December 29, 2024 and sell it today you would lose (612.00) from holding UBS ETRACS or give up 28.01% of portfolio value over 90 days.

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

Volatility Shares Trust  vs.  UBS ETRACS

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.

UBS ETRACS

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS ETRACS 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 forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Volatility Shares and UBS ETRACS

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

The idea behind Volatility Shares Trust and UBS ETRACS 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.