Correlation Between Leverage Shares and IShares Treasury

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

By analyzing existing cross correlation between Leverage Shares 2x and iShares Treasury Bond, you can compare the effects of market volatilities on Leverage Shares and IShares Treasury 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 Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and IShares Treasury.

Diversification Opportunities for Leverage Shares and IShares Treasury

0.21

Correlation Coefficient

Leverage Shares  IShares Treasury

Modest diversification

The 3 months correlation between Leverage and IShares is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and iShares Treasury Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Treasury Bond 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 2x are associated (or correlated) with IShares Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Treasury Bond has no effect on the direction of Leverage Shares i.e., Leverage Shares and IShares Treasury go up and down completely randomly.

Pair Corralation between Leverage Shares and IShares Treasury

Assuming the 90 days trading horizon Leverage Shares 2x is expected to under-perform the IShares Treasury. In addition to that, Leverage Shares is 4.01 times more volatile than iShares Treasury Bond. It trades about -0.01 of its total potential returns per unit of risk. iShares Treasury Bond is currently generating about 0.0 per unit of volatility. If you would invest  344.00  in iShares Treasury Bond on December 4, 2024 and sell it today you would lose (1.00) from holding iShares Treasury Bond or give up 0.29% of portfolio value over 90 days.

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

Leverage Shares 2x  vs.  iShares Treasury Bond

Leverage Shares 2x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leverage Shares 2x 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.

iShares Treasury Bond

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Leverage Shares 2x and iShares Treasury Bond 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.