Correlation Between Leverage Shares and Vanguard
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and Vanguard 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 Vanguard 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 Vanguard SP 500, you can compare the effects of market volatilities on Leverage Shares and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Vanguard.
Diversification Opportunities for Leverage Shares and Vanguard
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Leverage and Vanguard is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and Vanguard SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard SP 500 has no effect on the direction of Leverage Shares i.e., Leverage Shares and Vanguard go up and down completely randomly.
Pair Corralation between Leverage Shares and Vanguard
Assuming the 90 days trading horizon Leverage Shares 3x is expected to under-perform the Vanguard. In addition to that, Leverage Shares is 10.51 times more volatile than Vanguard SP 500. It trades about -0.03 of its total potential returns per unit of risk. Vanguard SP 500 is currently generating about 0.15 per unit of volatility. If you would invest 6,812 in Vanguard SP 500 on September 14, 2024 and sell it today you would earn a total of 2,248 from holding Vanguard SP 500 or generate 33.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 3x vs. Vanguard SP 500
Performance |
| Timeline |
| Leverage Shares 3x |
| Vanguard SP 500 |
Leverage Shares and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and Vanguard
The main advantage of trading using opposite Leverage Shares and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| Leverage Shares vs. WisdomTree Natural Gas | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. WisdomTree Natural Gas | Leverage Shares vs. WisdomTree SP 500 |
| Vanguard vs. Leverage Shares 3x | Vanguard vs. Leverage Shares 3x | Vanguard vs. SP 500 VIX | Vanguard vs. WisdomTree Natural Gas |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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