Correlation Between Strategy Shares and Defiance

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

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

Diversification Opportunities for Strategy Shares and Defiance

0.97

Correlation Coefficient

Strategy Shares  Defiance

Almost no diversification

The 3 months correlation between Strategy and Defiance is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Strategy Shares and Defiance SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defiance SP 500 and Strategy 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 Strategy Shares are associated (or correlated) with Defiance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defiance SP 500 has no effect on the direction of Strategy Shares i.e., Strategy Shares and Defiance go up and down completely randomly.

Pair Corralation between Strategy Shares and Defiance

Given the investment horizon of 90 days Strategy Shares is expected to generate 2.54 times less return on investment than Defiance. But when comparing it to its historical volatility, Strategy Shares is 1.04 times less risky than Defiance. It trades about 0.17 of its potential returns per unit of risk. Defiance SP 500 is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  3,084  in Defiance SP 500 on May 1, 2025 and sell it today you would earn a total of  369.00  from holding Defiance SP 500 or generate 11.96% return on investment over 90 days.

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

Strategy Shares  vs.  Defiance SP 500

Strategy Shares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategy Shares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Strategy Shares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Defiance SP 500

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Defiance SP 500 are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Defiance may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Strategy Shares and Defiance

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

The idea behind Strategy Shares and Defiance SP 500 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 Stocks Directory module to find actively traded stocks across global markets.