Correlation Between SP 500 and LS 1x

Can any of the company-specific risk be diversified away by investing in both SP 500 and LS 1x 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 SP 500 and LS 1x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 VIX and LS 1x Coinbase, you can compare the effects of market volatilities on SP 500 and LS 1x 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 SP 500 with a short position of LS 1x. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and LS 1x.

Diversification Opportunities for SP 500 and LS 1x

-0.79

Correlation Coefficient

SP 500  LS 1x

Pay attention - limited upside

The 3 months correlation between VILX and COI1 is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and LS 1x Coinbase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS 1x Coinbase and SP 500 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 SP 500 VIX are associated (or correlated) with LS 1x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS 1x Coinbase has no effect on the direction of SP 500 i.e., SP 500 and LS 1x go up and down completely randomly.

Pair Corralation between SP 500 and LS 1x

Assuming the 90 days trading horizon SP 500 VIX is expected to under-perform the LS 1x. In addition to that, SP 500 is 1.16 times more volatile than LS 1x Coinbase. It trades about -0.07 of its total potential returns per unit of risk. LS 1x Coinbase is currently generating about 0.22 per unit of volatility. If you would invest  312.00  in LS 1x Coinbase on September 12, 2024 and sell it today you would earn a total of  319.00  from holding LS 1x Coinbase or generate 102.24% return on investment over 90 days.

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

SP 500 VIX  vs.  LS 1x Coinbase

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.

LS 1x Coinbase

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Coinbase are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SP 500 and LS 1x

The main advantage of trading using opposite SP 500 and LS 1x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 position performs unexpectedly, LS 1x 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 LS 1x will offset losses from the drop in LS 1x's long position.

The idea behind SP 500 VIX and LS 1x Coinbase 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.