Correlation Between Leverage Shares and IShares Edge
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and IShares Edge 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 Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leverage Shares 3x and iShares Edge MSCI, you can compare the effects of market volatilities on Leverage Shares and IShares Edge 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 Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and IShares Edge.
Diversification Opportunities for Leverage Shares and IShares Edge
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leverage and IShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and iShares Edge MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge MSCI 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 3x are associated (or correlated) with IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge MSCI has no effect on the direction of Leverage Shares i.e., Leverage Shares and IShares Edge go up and down completely randomly.
Pair Corralation between Leverage Shares and IShares Edge
Assuming the 90 days trading horizon Leverage Shares 3x is expected to under-perform the IShares Edge. In addition to that, Leverage Shares is 17.62 times more volatile than iShares Edge MSCI. It trades about -0.14 of its total potential returns per unit of risk. iShares Edge MSCI is currently generating about 0.34 per unit of volatility. If you would invest 741.00 in iShares Edge MSCI on November 28, 2024 and sell it today you would earn a total of 28.00 from holding iShares Edge MSCI or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Leverage Shares 3x vs. iShares Edge MSCI
Performance |
| Timeline |
| Leverage Shares 3x |
| iShares Edge MSCI |
Leverage Shares and IShares Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and IShares Edge
The main advantage of trading using opposite Leverage Shares and IShares Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, IShares Edge 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 Edge will offset losses from the drop in IShares Edge's long position.| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x |
| IShares Edge vs. iShares MSCI Japan | IShares Edge vs. iShares JP Morgan | IShares Edge vs. iShares MSCI Europe | IShares Edge vs. iShares Nasdaq Biotechnology |
Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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