Correlation Between Leverage Shares and Lyxor Core

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

Diversification Opportunities for Leverage Shares and Lyxor Core

0.46

Correlation Coefficient

Leverage Shares  Lyxor Core

Very weak diversification

The 3 months correlation between Leverage and Lyxor is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and Lyxor Core UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyxor Core UK 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 Lyxor Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyxor Core UK has no effect on the direction of Leverage Shares i.e., Leverage Shares and Lyxor Core go up and down completely randomly.

Pair Corralation between Leverage Shares and Lyxor Core

Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 6.51 times more return on investment than Lyxor Core. However, Leverage Shares is 6.51 times more volatile than Lyxor Core UK. It trades about 0.01 of its potential returns per unit of risk. Lyxor Core UK is currently generating about -0.04 per unit of risk. If you would invest  46,171  in Leverage Shares 3x on December 2, 2024 and sell it today you would lose (7,636) from holding Leverage Shares 3x or give up 16.54% of portfolio value over 90 days.

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

Leverage Shares 3x  vs.  Lyxor Core UK

Leverage Shares 3x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leverage Shares 3x 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.

Lyxor Core UK

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Leverage Shares 3x and Lyxor Core UK 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.