Correlation Between Leverage Shares and SP 500

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and SP 500 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 SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leverage Shares 5x and SP 500 VIX, you can compare the effects of market volatilities on Leverage Shares and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and SP 500.

Diversification Opportunities for Leverage Shares and SP 500

-0.75

Correlation Coefficient

Leverage Shares  SP 500

Pay attention - limited upside

The 3 months correlation between Leverage and VILX is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 5x and SP 500 VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 VIX 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 5x are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 VIX has no effect on the direction of Leverage Shares i.e., Leverage Shares and SP 500 go up and down completely randomly.

Pair Corralation between Leverage Shares and SP 500

Assuming the 90 days trading horizon Leverage Shares 5x is expected to generate 0.67 times more return on investment than SP 500. However, Leverage Shares 5x is 1.5 times less risky than SP 500. It trades about 0.16 of its potential returns per unit of risk. SP 500 VIX is currently generating about -0.06 per unit of risk. If you would invest  138.00  in Leverage Shares 5x on September 13, 2024 and sell it today you would earn a total of  69.00  from holding Leverage Shares 5x or generate 50.0% return on investment over 90 days.

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

Leverage Shares 5x  vs.  SP 500 VIX

Leverage Shares 5x

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 5x are ranked lower than 12 (%) 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.

SP 500 VIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP 500 VIX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Leverage Shares and SP 500

The main advantage of trading using opposite Leverage Shares and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

The idea behind Leverage Shares 5x and SP 500 VIX 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.