Correlation Between Leverage Shares and HSBC NASDAQ

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

Diversification Opportunities for Leverage Shares and HSBC NASDAQ

0.39

Correlation Coefficient

Leverage Shares  HSBC NASDAQ

Weak diversification

The 3 months correlation between Leverage and HSBC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and HSBC NASDAQ Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC NASDAQ Global 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 HSBC NASDAQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC NASDAQ Global has no effect on the direction of Leverage Shares i.e., Leverage Shares and HSBC NASDAQ go up and down completely randomly.

Pair Corralation between Leverage Shares and HSBC NASDAQ

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 3.22 times more return on investment than HSBC NASDAQ. However, Leverage Shares is 3.22 times more volatile than HSBC NASDAQ Global. It trades about -0.02 of its potential returns per unit of risk. HSBC NASDAQ Global is currently generating about -0.06 per unit of risk. If you would invest  662,300  in Leverage Shares 2x on December 2, 2024 and sell it today you would lose (48,250) from holding Leverage Shares 2x or give up 7.29% of portfolio value over 90 days.

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

Leverage Shares 2x  vs.  HSBC NASDAQ Global

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 comparatively stable basic indicators, Leverage Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

HSBC NASDAQ Global

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Leverage Shares and HSBC NASDAQ

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

The idea behind Leverage Shares 2x and HSBC NASDAQ Global 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.