Correlation Between Leverage Shares and IShares SP

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

Diversification Opportunities for Leverage Shares and IShares SP

0.73

Correlation Coefficient

Leverage Shares  IShares SP

Poor diversification

The 3 months correlation between Leverage and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and iShares SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP SmallCap 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 IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP SmallCap has no effect on the direction of Leverage Shares i.e., Leverage Shares and IShares SP go up and down completely randomly.

Pair Corralation between Leverage Shares and IShares SP

Assuming the 90 days trading horizon Leverage Shares 3x is expected to under-perform the IShares SP. In addition to that, Leverage Shares is 2.6 times more volatile than iShares SP SmallCap. It trades about -0.25 of its total potential returns per unit of risk. iShares SP SmallCap is currently generating about -0.34 per unit of volatility. If you would invest  10,139  in iShares SP SmallCap on October 6, 2024 and sell it today you would lose (724.00) from holding iShares SP SmallCap or give up 7.14% of portfolio value over 90 days.

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

Leverage Shares 3x  vs.  iShares SP SmallCap

Leverage Shares 3x

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 14 (%) 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.

iShares SP SmallCap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP SmallCap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares SP 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 SP

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

The idea behind Leverage Shares 3x and iShares SP SmallCap 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.