Correlation Between IShares China and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both IShares China 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 IShares China and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares China CNY and Leverage Shares 3x, you can compare the effects of market volatilities on IShares China 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 IShares China with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares China and Leverage Shares.
Diversification Opportunities for IShares China and Leverage Shares
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Leverage is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding iShares China CNY and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x and IShares China 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 iShares China CNY 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 3x has no effect on the direction of IShares China i.e., IShares China and Leverage Shares go up and down completely randomly.
Pair Corralation between IShares China and Leverage Shares
Assuming the 90 days trading horizon IShares China is expected to generate 1.6 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, iShares China CNY is 49.22 times less risky than Leverage Shares. It trades about 0.3 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 9.56 in Leverage Shares 3x on September 12, 2024 and sell it today you would lose (1.37) from holding Leverage Shares 3x or give up 14.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares China CNY vs. Leverage Shares 3x
Performance |
| Timeline |
| iShares China CNY |
| Leverage Shares 3x |
IShares China and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares China and Leverage Shares
The main advantage of trading using opposite IShares China and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China 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.| IShares China vs. SPDR Dow Jones | IShares China vs. iShares Core MSCI | IShares China vs. iShares SP 500 | IShares China vs. Vanguard FTSE All World |
| Leverage Shares vs. Vanguard SP 500 | Leverage Shares vs. SPDR Dow Jones | Leverage Shares vs. iShares Core MSCI | Leverage Shares vs. iShares SP 500 |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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