Correlation Between SPDR Morningstar and Leverage Shares

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

By analyzing existing cross correlation between SPDR Morningstar Multi Asset and Leverage Shares 3x, you can compare the effects of market volatilities on SPDR Morningstar and Leverage Shares 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 SPDR Morningstar with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Morningstar and Leverage Shares.

Diversification Opportunities for SPDR Morningstar and Leverage Shares

0.28

Correlation Coefficient

SPDR Morningstar  Leverage Shares

Modest diversification

The 3 months correlation between SPDR and Leverage is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Morningstar Multi Asset and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x and SPDR Morningstar 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 SPDR Morningstar Multi Asset are associated (or correlated) with Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of SPDR Morningstar i.e., SPDR Morningstar and Leverage Shares go up and down completely randomly.

Pair Corralation between SPDR Morningstar and Leverage Shares

Assuming the 90 days trading horizon SPDR Morningstar Multi Asset is expected to under-perform the Leverage Shares. But the etf apears to be less risky and, when comparing its historical volatility, SPDR Morningstar Multi Asset is 25.64 times less risky than Leverage Shares. The etf trades about -0.01 of its potential returns per unit of risk. The Leverage Shares 3x is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,651,880  in Leverage Shares 3x on December 30, 2024 and sell it today you would lose (1,832,080) from holding Leverage Shares 3x or give up 32.42% of portfolio value over 90 days.

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

SPDR Morningstar Multi Asset  vs.  Leverage Shares 3x

SPDR Morningstar Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Morningstar Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SPDR Morningstar is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Leverage Shares 3x

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Morningstar and Leverage Shares

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

The idea behind SPDR Morningstar Multi Asset and Leverage Shares 3x 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.