Correlation Between Leverage Shares and LS ARK

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

Diversification Opportunities for Leverage Shares and LS ARK

-0.49

Correlation Coefficient

Leverage Shares  LS ARK

Very good diversification

The 3 months correlation between Leverage and ARKA is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and LS ARK Innovation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS ARK Innovation 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 LS ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS ARK Innovation has no effect on the direction of Leverage Shares i.e., Leverage Shares and LS ARK go up and down completely randomly.

Pair Corralation between Leverage Shares and LS ARK

Assuming the 90 days trading horizon Leverage Shares 2x is expected to under-perform the LS ARK. In addition to that, Leverage Shares is 2.22 times more volatile than LS ARK Innovation. It trades about -0.04 of its total potential returns per unit of risk. LS ARK Innovation is currently generating about 0.2 per unit of volatility. If you would invest  17,540  in LS ARK Innovation on September 1, 2024 and sell it today you would earn a total of  5,590  from holding LS ARK Innovation or generate 31.87% return on investment over 90 days.

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

Leverage Shares 2x  vs.  LS ARK Innovation

Leverage Shares 2x

Risk-Adjusted Performance

0 of 100

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 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.

LS ARK Innovation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LS ARK Innovation are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS ARK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leverage Shares and LS ARK

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

The idea behind Leverage Shares 2x and LS ARK Innovation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.