Correlation Between Volatility Shares and SPDR Kensho

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

Diversification Opportunities for Volatility Shares and SPDR Kensho

0.88

Correlation Coefficient

Volatility Shares  SPDR Kensho

Very poor diversification

The 3 months correlation between Volatility and SPDR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and SPDR Kensho Intelligent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Kensho Intelligent 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 SPDR Kensho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Kensho Intelligent has no effect on the direction of Volatility Shares i.e., Volatility Shares and SPDR Kensho go up and down completely randomly.

Pair Corralation between Volatility Shares and SPDR Kensho

Given the investment horizon of 90 days Volatility Shares Trust is expected to under-perform the SPDR Kensho. In addition to that, Volatility Shares is 5.33 times more volatile than SPDR Kensho Intelligent. It trades about -0.07 of its total potential returns per unit of risk. SPDR Kensho Intelligent is currently generating about -0.1 per unit of volatility. If you would invest  3,418  in SPDR Kensho Intelligent on December 28, 2024 and sell it today you would lose (230.20) from holding SPDR Kensho Intelligent or give up 6.73% of portfolio value over 90 days.

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

Volatility Shares Trust  vs.  SPDR Kensho Intelligent

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 unsteady 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.

SPDR Kensho Intelligent

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Kensho Intelligent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with Volatility Shares and SPDR Kensho

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

The idea behind Volatility Shares Trust and SPDR Kensho Intelligent 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.