Correlation Between Leverage Shares and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and SPDR SP 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 SPDR SP 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 SPDR SP 500, you can compare the effects of market volatilities on Leverage Shares and SPDR SP 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and SPDR SP.
Diversification Opportunities for Leverage Shares and SPDR SP
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leverage and SPDR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and SPDR SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 500 has no effect on the direction of Leverage Shares i.e., Leverage Shares and SPDR SP go up and down completely randomly.
Pair Corralation between Leverage Shares and SPDR SP
Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 10.5 times more return on investment than SPDR SP. However, Leverage Shares is 10.5 times more volatile than SPDR SP 500. It trades about 0.28 of its potential returns per unit of risk. SPDR SP 500 is currently generating about 0.32 per unit of risk. If you would invest 1,925 in Leverage Shares 3x on August 25, 2024 and sell it today you would earn a total of 1,228 from holding Leverage Shares 3x or generate 63.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 3x vs. SPDR SP 500
Performance |
| Timeline |
| Leverage Shares 3x |
| SPDR SP 500 |
Leverage Shares and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and SPDR SP
The main advantage of trading using opposite Leverage Shares and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x | Leverage Shares vs. Leverage Shares 3x |
| SPDR SP vs. Leverage Shares 3x | SPDR SP vs. Leverage Shares 3x | SPDR SP vs. Leverage Shares 3x | SPDR SP vs. WisdomTree Short GBP |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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