Correlation Between Rio2 and Leverage Shares

Can any of the company-specific risk be diversified away by investing in both Rio2 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 Rio2 and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rio2 and Leverage Shares 2X, you can compare the effects of market volatilities on Rio2 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 Rio2 with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and Leverage Shares.

Diversification Opportunities for Rio2 and Leverage Shares

0.68

Correlation Coefficient

Rio2  Leverage Shares

Poor diversification

The 3 months correlation between Rio2 and Leverage is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 and Leverage Shares 2X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 2X and Rio2 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 Rio2 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 2X has no effect on the direction of Rio2 i.e., Rio2 and Leverage Shares go up and down completely randomly.

Pair Corralation between Rio2 and Leverage Shares

Assuming the 90 days trading horizon Rio2 is expected to generate 1.91 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Rio2 is 2.26 times less risky than Leverage Shares. It trades about 0.12 of its potential returns per unit of risk. Leverage Shares 2X is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,635  in Leverage Shares 2X on August 13, 2025 and sell it today you would earn a total of  1,184  from holding Leverage Shares 2X or generate 44.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Rio2  vs.  Leverage Shares 2X

Rio2

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Rio2 displayed solid returns over the last few months and may actually be approaching a breakup point.

Leverage Shares 2X

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2X are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Leverage Shares reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio2 and Leverage Shares

The main advantage of trading using opposite Rio2 and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 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 Rio2 and Leverage Shares 2X 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.