Correlation Between Cboe Validus and ProShares VIX

Can any of the company-specific risk be diversified away by investing in both Cboe Validus 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 Cboe Validus and ProShares VIX into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cboe Validus SP and ProShares VIX Mid Term, you can compare the effects of market volatilities on Cboe Validus 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 Cboe Validus with a short position of ProShares VIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe Validus and ProShares VIX.

Diversification Opportunities for Cboe Validus and ProShares VIX

-0.15

Correlation Coefficient

Cboe Validus  ProShares VIX

Good diversification

The 3 months correlation between Cboe and ProShares is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Validus SP and ProShares VIX Mid Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares VIX Mid and Cboe Validus 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 Cboe Validus SP 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 Mid has no effect on the direction of Cboe Validus i.e., Cboe Validus and ProShares VIX go up and down completely randomly.

Pair Corralation between Cboe Validus and ProShares VIX

Given the investment horizon of 90 days Cboe Validus is expected to generate 12.81 times less return on investment than ProShares VIX. But when comparing it to its historical volatility, Cboe Validus SP is 4.14 times less risky than ProShares VIX. It trades about 0.03 of its potential returns per unit of risk. ProShares VIX Mid Term is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,382  in ProShares VIX Mid Term on December 2, 2024 and sell it today you would earn a total of  129.00  from holding ProShares VIX Mid Term or generate 9.33% return on investment over 90 days.

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

Cboe Validus SP  vs.  ProShares VIX Mid Term

Cboe Validus SP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cboe Validus SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Cboe Validus is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ProShares VIX Mid

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares VIX Mid Term are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, ProShares VIX may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cboe Validus and ProShares VIX

The main advantage of trading using opposite Cboe Validus and ProShares VIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cboe Validus 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 Cboe Validus SP and ProShares VIX Mid 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.