Correlation Between Volatility Shares and First Trust

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

Diversification Opportunities for Volatility Shares and First Trust

0.76

Correlation Coefficient

Volatility Shares  First Trust

Poor diversification

The 3 months correlation between Volatility and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Volatility Shares Trust and First Trust Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Multi 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Multi has no effect on the direction of Volatility Shares i.e., Volatility Shares and First Trust go up and down completely randomly.

Pair Corralation between Volatility Shares and First Trust

Given the investment horizon of 90 days Volatility Shares Trust is expected to generate 4.81 times more return on investment than First Trust. However, Volatility Shares is 4.81 times more volatile than First Trust Multi. It trades about 0.04 of its potential returns per unit of risk. First Trust Multi is currently generating about 0.19 per unit of risk. If you would invest  5,753  in Volatility Shares Trust on May 24, 2025 and sell it today you would earn a total of  292.00  from holding Volatility Shares Trust or generate 5.08% return on investment over 90 days.

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

Volatility Shares Trust  vs.  First Trust Multi

Volatility Shares Trust

Risk-Adjusted Performance

Weakest

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Volatility Shares may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Trust Multi

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Multi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Volatility Shares and First Trust

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

The idea behind Volatility Shares Trust and First Trust Multi 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.