Correlation Between Leverage Shares and VanEck New

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

Diversification Opportunities for Leverage Shares and VanEck New

0.23

Correlation Coefficient

Leverage Shares  VanEck New

Modest diversification

The 3 months correlation between Leverage and VanEck is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and VanEck New China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck New China 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 VanEck New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck New China has no effect on the direction of Leverage Shares i.e., Leverage Shares and VanEck New go up and down completely randomly.

Pair Corralation between Leverage Shares and VanEck New

Assuming the 90 days trading horizon Leverage Shares is expected to generate 1.16 times less return on investment than VanEck New. But when comparing it to its historical volatility, Leverage Shares 2x is 1.53 times less risky than VanEck New. It trades about 0.19 of its potential returns per unit of risk. VanEck New China is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  869.00  in VanEck New China on September 14, 2024 and sell it today you would earn a total of  273.00  from holding VanEck New China or generate 31.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Leverage Shares 2x  vs.  VanEck New China

Leverage Shares 2x

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 14 (%) 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.

VanEck New China

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck New China are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck New unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leverage Shares and VanEck New

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

The idea behind Leverage Shares 2x and VanEck New China 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.