Correlation Between Leverage Shares and SPDR MSCI

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

Diversification Opportunities for Leverage Shares and SPDR MSCI

0.14

Correlation Coefficient

Leverage Shares  SPDR MSCI

Average diversification

The 3 months correlation between Leverage and SPDR is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and SPDR MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR MSCI Emerging 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 SPDR MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR MSCI Emerging has no effect on the direction of Leverage Shares i.e., Leverage Shares and SPDR MSCI go up and down completely randomly.

Pair Corralation between Leverage Shares and SPDR MSCI

Assuming the 90 days trading horizon Leverage Shares 2x is expected to under-perform the SPDR MSCI. In addition to that, Leverage Shares is 3.98 times more volatile than SPDR MSCI Emerging. It trades about -0.19 of its total potential returns per unit of risk. SPDR MSCI Emerging is currently generating about -0.04 per unit of volatility. If you would invest  11,484  in SPDR MSCI Emerging on December 29, 2024 and sell it today you would lose (284.00) from holding SPDR MSCI Emerging or give up 2.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Leverage Shares 2x  vs.  SPDR MSCI Emerging

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 weak 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.

SPDR MSCI Emerging

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Leverage Shares and SPDR MSCI

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

The idea behind Leverage Shares 2x and SPDR MSCI Emerging 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 Global Correlations module to find global opportunities by holding instruments from different markets.