Correlation Between Global X and Volatility Shares

Can any of the company-specific risk be diversified away by investing in both Global X and Volatility Shares 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 Global X and Volatility Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Blockchain and Volatility Shares Trust, you can compare the effects of market volatilities on Global X and Volatility Shares 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 Global X with a short position of Volatility Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Volatility Shares.

Diversification Opportunities for Global X and Volatility Shares

0.9

Correlation Coefficient

Global X  Volatility Shares

Almost no diversification

The 3 months correlation between Global and Volatility is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Global X Blockchain and Volatility Shares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volatility Shares Trust and Global X 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 Global X Blockchain are associated (or correlated) with Volatility Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volatility Shares Trust has no effect on the direction of Global X i.e., Global X and Volatility Shares go up and down completely randomly.

Pair Corralation between Global X and Volatility Shares

Given the investment horizon of 90 days Global X Blockchain is expected to generate 0.57 times more return on investment than Volatility Shares. However, Global X Blockchain is 1.76 times less risky than Volatility Shares. It trades about 0.05 of its potential returns per unit of risk. Volatility Shares Trust is currently generating about 0.0 per unit of risk. If you would invest  4,404  in Global X Blockchain on October 7, 2024 and sell it today you would earn a total of  1,453  from holding Global X Blockchain or generate 32.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	65.64%
Values	Daily Returns

Global X Blockchain  vs.  Volatility Shares Trust

Global X Blockchain

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Blockchain are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Global X demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Volatility Shares Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Volatility Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Volatility Shares

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

The idea behind Global X Blockchain and Volatility Shares 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.