Correlation Between SPDR MSCI and Leverage Shares

Can any of the company-specific risk be diversified away by investing in both SPDR MSCI 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 MSCI 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 MSCI Europe and Leverage Shares 3x, you can compare the effects of market volatilities on SPDR MSCI 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 MSCI with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and Leverage Shares.

Diversification Opportunities for SPDR MSCI and Leverage Shares

0.09

Correlation Coefficient

SPDR MSCI  Leverage Shares

Significant diversification

The 3 months correlation between SPDR and Leverage is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Europe 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 MSCI 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 MSCI Europe 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 MSCI i.e., SPDR MSCI and Leverage Shares go up and down completely randomly.

Pair Corralation between SPDR MSCI and Leverage Shares

Assuming the 90 days trading horizon SPDR MSCI Europe is expected to generate 0.1 times more return on investment than Leverage Shares. However, SPDR MSCI Europe is 10.47 times less risky than Leverage Shares. It trades about 0.04 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about -0.03 per unit of risk. If you would invest  1,054  in SPDR MSCI Europe on October 24, 2024 and sell it today you would earn a total of  18.00  from holding SPDR MSCI Europe or generate 1.71% return on investment over 90 days.

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

SPDR MSCI Europe  vs.  Leverage Shares 3x

SPDR MSCI Europe

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, SPDR MSCI is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Leverage Shares 3x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leverage Shares 3x 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with SPDR MSCI and Leverage Shares

The main advantage of trading using opposite SPDR MSCI and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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 MSCI Europe 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.