Correlation Between Microsoft and Leverage Shares

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

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

Diversification Opportunities for Microsoft and Leverage Shares

-0.47

Correlation Coefficient

Microsoft  Leverage Shares

Very good diversification

The 3 months correlation between Microsoft and Leverage is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Leverage Shares go up and down completely randomly.

Pair Corralation between Microsoft and Leverage Shares

Given the investment horizon of 90 days Microsoft is expected to generate 41.32 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Microsoft is 8.95 times less risky than Leverage Shares. It trades about 0.02 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  921.00  in Leverage Shares 3x on September 21, 2024 and sell it today you would earn a total of  237.00  from holding Leverage Shares 3x or generate 25.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Leverage Shares 3x

Microsoft

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Leverage Shares 3x

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Leverage Shares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Leverage Shares

The main advantage of trading using opposite Microsoft and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.