Correlation Between Leverage Shares and LS 1x

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and LS 1x 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 LS 1x 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 LS 1x Coinbase, you can compare the effects of market volatilities on Leverage Shares and LS 1x 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 LS 1x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and LS 1x.

Diversification Opportunities for Leverage Shares and LS 1x

0.95

Correlation Coefficient

Leverage Shares  LS 1x

Almost no diversification

The 3 months correlation between Leverage and COI1 is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and LS 1x Coinbase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS 1x Coinbase 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 LS 1x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS 1x Coinbase has no effect on the direction of Leverage Shares i.e., Leverage Shares and LS 1x go up and down completely randomly.

Pair Corralation between Leverage Shares and LS 1x

Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 2.04 times more return on investment than LS 1x. However, Leverage Shares is 2.04 times more volatile than LS 1x Coinbase. It trades about 0.29 of its potential returns per unit of risk. LS 1x Coinbase is currently generating about 0.21 per unit of risk. If you would invest  743,210  in Leverage Shares 3x on September 13, 2024 and sell it today you would earn a total of  3,581,100  from holding Leverage Shares 3x or generate 481.84% return on investment over 90 days.

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

Leverage Shares 3x  vs.  LS 1x Coinbase

Leverage Shares 3x

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 22 (%) 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.

LS 1x Coinbase

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Coinbase are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leverage Shares and LS 1x

The main advantage of trading using opposite Leverage Shares and LS 1x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, LS 1x 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 LS 1x will offset losses from the drop in LS 1x's long position.

The idea behind Leverage Shares 3x and LS 1x Coinbase 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.