Correlation Between Leverage Shares and IShares JP

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

By analyzing existing cross correlation between Leverage Shares 3x and iShares JP Morgan, you can compare the effects of market volatilities on Leverage Shares and IShares JP 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 IShares JP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and IShares JP.

Diversification Opportunities for Leverage Shares and IShares JP

0.35

Correlation Coefficient

Leverage Shares  IShares JP

Weak diversification

The 3 months correlation between Leverage and IShares is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and iShares JP Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares JP Morgan 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 3x are associated (or correlated) with IShares JP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares JP Morgan has no effect on the direction of Leverage Shares i.e., Leverage Shares and IShares JP go up and down completely randomly.

Pair Corralation between Leverage Shares and IShares JP

Assuming the 90 days trading horizon Leverage Shares is expected to generate 12.64 times less return on investment than IShares JP. But when comparing it to its historical volatility, Leverage Shares 3x is 16.71 times less risky than IShares JP. It trades about 0.17 of its potential returns per unit of risk. iShares JP Morgan is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,398  in iShares JP Morgan on October 21, 2024 and sell it today you would earn a total of  335,252  from holding iShares JP Morgan or generate 9866.16% return on investment over 90 days.

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

Leverage Shares 3x  vs.  iShares JP Morgan

Leverage Shares 3x

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

iShares JP Morgan

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares JP Morgan are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IShares JP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leverage Shares and IShares JP

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

The idea behind Leverage Shares 3x and iShares JP Morgan 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.