Correlation Between Leverage Shares and SSgA SPDR

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

Diversification Opportunities for Leverage Shares and SSgA SPDR

-0.37

Correlation Coefficient

Leverage Shares  SSgA SPDR

Very good diversification

The 3 months correlation between Leverage and SSgA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs 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 SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of Leverage Shares i.e., Leverage Shares and SSgA SPDR go up and down completely randomly.

Pair Corralation between Leverage Shares and SSgA SPDR

Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 8.13 times more return on investment than SSgA SPDR. However, Leverage Shares is 8.13 times more volatile than SSgA SPDR ETFs. It trades about 0.04 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.15 per unit of risk. If you would invest  49,471  in Leverage Shares 3x on September 13, 2024 and sell it today you would lose (1,173) from holding Leverage Shares 3x or give up 2.37% of portfolio value over 90 days.

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

Leverage Shares 3x  vs.  SSgA SPDR ETFs

Leverage Shares 3x

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 2 (%) 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.

SSgA SPDR ETFs

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SSgA SPDR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Leverage Shares and SSgA SPDR

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

The idea behind Leverage Shares 3x and SSgA SPDR ETFs 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.