Correlation Between VanEck Defense and Leverage Shares

Can any of the company-specific risk be diversified away by investing in both VanEck Defense 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 VanEck Defense and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VanEck Defense ETF and Leverage Shares 3x, you can compare the effects of market volatilities on VanEck Defense 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 VanEck Defense with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Defense and Leverage Shares.

Diversification Opportunities for VanEck Defense and Leverage Shares

-0.81

Correlation Coefficient

VanEck Defense  Leverage Shares

Pay attention - limited upside

The 3 months correlation between VanEck and Leverage is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF 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 VanEck Defense 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 VanEck Defense ETF 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 VanEck Defense i.e., VanEck Defense and Leverage Shares go up and down completely randomly.

Pair Corralation between VanEck Defense and Leverage Shares

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 0.08 times more return on investment than Leverage Shares. However, VanEck Defense ETF is 11.91 times less risky than Leverage Shares. It trades about 0.14 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  1,853  in VanEck Defense ETF on September 26, 2024 and sell it today you would earn a total of  1,629  from holding VanEck Defense ETF or generate 87.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	88.02%
Values	Daily Returns

VanEck Defense ETF  vs.  Leverage Shares 3x

VanEck Defense ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 fragile performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with VanEck Defense and Leverage Shares

The main advantage of trading using opposite VanEck Defense and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Defense 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 VanEck Defense ETF 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.