Correlation Between Leverage Shares and JPM BetaBuilders

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

Diversification Opportunities for Leverage Shares and JPM BetaBuilders

0.45

Correlation Coefficient

Leverage Shares  JPM BetaBuilders

Very weak diversification

The 3 months correlation between Leverage and JPM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and JPM BetaBuilders Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPM BetaBuilders Treasury 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 JPM BetaBuilders. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPM BetaBuilders Treasury has no effect on the direction of Leverage Shares i.e., Leverage Shares and JPM BetaBuilders go up and down completely randomly.

Pair Corralation between Leverage Shares and JPM BetaBuilders

Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 25.92 times more return on investment than JPM BetaBuilders. However, Leverage Shares is 25.92 times more volatile than JPM BetaBuilders Treasury. It trades about 0.22 of its potential returns per unit of risk. JPM BetaBuilders Treasury is currently generating about 0.23 per unit of risk. If you would invest  1,226,530  in Leverage Shares 3x on October 23, 2024 and sell it today you would earn a total of  3,181,910  from holding Leverage Shares 3x or generate 259.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Leverage Shares 3x  vs.  JPM BetaBuilders Treasury

Leverage Shares 3x

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 17 (%) 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.

JPM BetaBuilders Treasury

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in JPM BetaBuilders Treasury are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JPM BetaBuilders may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Leverage Shares and JPM BetaBuilders

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

The idea behind Leverage Shares 3x and JPM BetaBuilders Treasury 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 Stocks Directory module to find actively traded stocks across global markets.