Correlation Between Leverage Shares and VanEck IBoxx

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

Diversification Opportunities for Leverage Shares and VanEck IBoxx

-0.14

Correlation Coefficient

Leverage Shares  VanEck IBoxx

Good diversification

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

Pair Corralation between Leverage Shares and VanEck IBoxx

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 110.18 times more return on investment than VanEck IBoxx. However, Leverage Shares is 110.18 times more volatile than VanEck iBoxx EUR. It trades about 0.04 of its potential returns per unit of risk. VanEck iBoxx EUR is currently generating about 0.03 per unit of risk. If you would invest  9,624  in Leverage Shares 2x on December 4, 2024 and sell it today you would lose (7,333) from holding Leverage Shares 2x or give up 76.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Leverage Shares 2x  vs.  VanEck iBoxx EUR

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.

VanEck iBoxx EUR

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck iBoxx EUR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck IBoxx 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 VanEck IBoxx

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

The idea behind Leverage Shares 2x and VanEck iBoxx EUR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.