Correlation Between IShares VII and Leverage Shares

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

By analyzing existing cross correlation between iShares VII PLC and Leverage Shares 1x, you can compare the effects of market volatilities on IShares VII 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 IShares VII with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares VII and Leverage Shares.

Diversification Opportunities for IShares VII and Leverage Shares

-0.45

Correlation Coefficient

IShares VII  Leverage Shares

Very good diversification

The 3 months correlation between IShares and Leverage is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding iShares VII PLC and Leverage Shares 1x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 1x and IShares VII 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 iShares VII PLC 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 1x has no effect on the direction of IShares VII i.e., IShares VII and Leverage Shares go up and down completely randomly.

Pair Corralation between IShares VII and Leverage Shares

Assuming the 90 days trading horizon iShares VII PLC is expected to generate 0.29 times more return on investment than Leverage Shares. However, iShares VII PLC is 3.47 times less risky than Leverage Shares. It trades about 0.08 of its potential returns per unit of risk. Leverage Shares 1x is currently generating about -0.29 per unit of risk. If you would invest  23,420  in iShares VII PLC on September 12, 2024 and sell it today you would earn a total of  1,280  from holding iShares VII PLC or generate 5.47% return on investment over 90 days.

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

iShares VII PLC  vs.  Leverage Shares 1x

iShares VII PLC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares VII PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares VII is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Leverage Shares 1x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leverage Shares 1x 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 IShares VII and Leverage Shares

The main advantage of trading using opposite IShares VII and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares VII 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 iShares VII PLC and Leverage Shares 1x 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.