Correlation Between Leverage Shares and IShares Global

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

By analyzing existing cross correlation between Leverage Shares 2x and iShares Global Aggregate, you can compare the effects of market volatilities on Leverage Shares and IShares Global 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 IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and IShares Global.

Diversification Opportunities for Leverage Shares and IShares Global

-0.72

Correlation Coefficient

Leverage Shares  IShares Global

Pay attention - limited upside

The 3 months correlation between Leverage and IShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and iShares Global Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Aggregate 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 2x are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Aggregate has no effect on the direction of Leverage Shares i.e., Leverage Shares and IShares Global go up and down completely randomly.

Pair Corralation between Leverage Shares and IShares Global

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 24.41 times more return on investment than IShares Global. However, Leverage Shares is 24.41 times more volatile than iShares Global Aggregate. It trades about 0.07 of its potential returns per unit of risk. iShares Global Aggregate is currently generating about -0.05 per unit of risk. If you would invest  596,550  in Leverage Shares 2x on August 25, 2024 and sell it today you would earn a total of  28,400  from holding Leverage Shares 2x or generate 4.76% return on investment over 90 days.

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

Leverage Shares 2x  vs.  iShares Global Aggregate

Leverage Shares 2x

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Leverage Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

iShares Global Aggregate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Aggregate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Leverage Shares and IShares Global

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

The idea behind Leverage Shares 2x and iShares Global Aggregate 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.