Correlation Between Leverage Shares and SSgA SPDR

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

By analyzing existing cross correlation between Leverage Shares 2x and SSgA SPDR MSCI, you can compare the effects of market volatilities on Leverage Shares and SSgA SPDR 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 Leverage Shares with a short position of SSgA SPDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and SSgA SPDR.

Diversification Opportunities for Leverage Shares and SSgA SPDR

0.62

Correlation Coefficient

Leverage Shares  SSgA SPDR

Poor diversification

The 3 months correlation between Leverage and SSgA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and SSgA SPDR MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR MSCI and Leverage 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 Leverage Shares 2x are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR MSCI has no effect on the direction of Leverage Shares i.e., Leverage Shares and SSgA SPDR go up and down completely randomly.

Pair Corralation between Leverage Shares and SSgA SPDR

Assuming the 90 days trading horizon Leverage Shares 2x is expected to under-perform the SSgA SPDR. In addition to that, Leverage Shares is 5.46 times more volatile than SSgA SPDR MSCI. It trades about -0.18 of its total potential returns per unit of risk. SSgA SPDR MSCI is currently generating about -0.09 per unit of volatility. If you would invest  11,539  in SSgA SPDR MSCI on December 2, 2024 and sell it today you would lose (418.00) from holding SSgA SPDR MSCI or give up 3.62% of portfolio value over 90 days.

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

Leverage Shares 2x  vs.  SSgA SPDR MSCI

Leverage Shares 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leverage Shares 2x 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 comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

SSgA SPDR MSCI

Risk-Adjusted Performance

Very Weak

Over the last 90 days SSgA SPDR MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SSgA SPDR is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Leverage Shares and SSgA SPDR

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

The idea behind Leverage Shares 2x and SSgA SPDR MSCI 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.