Correlation Between Dow Jones and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Leverage Shares 2x, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Leverage Shares.
Diversification Opportunities for Dow Jones and Leverage Shares
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Leverage is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Leverage Shares go up and down completely randomly.
Pair Corralation between Dow Jones and Leverage Shares
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Leverage Shares. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 2.75 times less risky than Leverage Shares. The index trades about -0.01 of its potential returns per unit of risk. The Leverage Shares 2x is currently generating about 0.45 of returns per unit of risk over similar time horizon. If you would invest 2,635 in Leverage Shares 2x on September 12, 2024 and sell it today you would earn a total of 452.00 from holding Leverage Shares 2x or generate 17.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
Dow Jones Industrial vs. Leverage Shares 2x
Performance |
| Timeline |
Dow Jones and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Leverage Shares 2x
Pair trading matchups for Leverage Shares
Pair Trading with Dow Jones and Leverage Shares
The main advantage of trading using opposite Dow Jones and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aeye Inc | Dow Jones vs. Gentex | Dow Jones vs. Marine Products | Dow Jones vs. CarsalesCom Ltd ADR |
| Leverage Shares vs. SPDR Dow Jones | Leverage Shares vs. iShares Core MSCI | Leverage Shares vs. iShares SP 500 | Leverage Shares vs. Vanguard FTSE All World |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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