Correlation Between Leverage Shares and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and SPDR 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 SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on Leverage Shares and SPDR 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and SPDR SP.

Diversification Opportunities for Leverage Shares and SPDR SP

0.69

Correlation Coefficient

Leverage Shares  SPDR SP

Poor diversification

The 3 months correlation between Leverage and SPDR is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Leverage Shares i.e., Leverage Shares and SPDR SP go up and down completely randomly.

Pair Corralation between Leverage Shares and SPDR SP

Assuming the 90 days trading horizon Leverage Shares 2x is expected to under-perform the SPDR SP. In addition to that, Leverage Shares is 8.29 times more volatile than SPDR SP 500. It trades about -0.05 of its total potential returns per unit of risk. SPDR SP 500 is currently generating about -0.13 per unit of volatility. If you would invest  1,153  in SPDR SP 500 on December 23, 2024 and sell it today you would lose (86.00) from holding SPDR SP 500 or give up 7.46% of portfolio value over 90 days.

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

Leverage Shares 2x  vs.  SPDR SP 500

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 uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

SPDR SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Leverage Shares and SPDR SP

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

The idea behind Leverage Shares 2x and SPDR SP 500 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.