Correlation Between Stellar and Leverage Shares

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Can any of the company-specific risk be diversified away by investing in both Stellar 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 Stellar and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stellar and Leverage Shares 3x, you can compare the effects of market volatilities on Stellar 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 Stellar with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stellar and Leverage Shares.

Diversification Opportunities for Stellar and Leverage Shares

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Stellar and Leverage is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Stellar 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 Stellar 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 Stellar 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 Stellar i.e., Stellar and Leverage Shares go up and down completely randomly.

Pair Corralation between Stellar and Leverage Shares

Assuming the 90 days trading horizon Stellar is expected to generate 2.31 times more return on investment than Leverage Shares. However, Stellar is 2.31 times more volatile than Leverage Shares 3x. It trades about 0.25 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.17 per unit of risk. If you would invest  9.19  in Stellar on October 10, 2024 and sell it today you would earn a total of  32.81  from holding Stellar or generate 357.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy96.83%
ValuesDaily Returns

Stellar  vs.  Leverage Shares 3x

 Performance 
       Timeline  
Stellar 

Risk-Adjusted Performance

20 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.
Leverage Shares 3x 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 13 (%) 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.

Stellar and Leverage Shares Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Stellar and Leverage Shares

The main advantage of trading using opposite Stellar and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stellar 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 Stellar 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.
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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