Correlation Between Microsoft and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Leverage Shares 3x, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Leverage Shares.
Diversification Opportunities for Microsoft and Leverage Shares
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Microsoft and Leverage is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Leverage Shares go up and down completely randomly.
Pair Corralation between Microsoft and Leverage Shares
Given the investment horizon of 90 days Microsoft is expected to under-perform the Leverage Shares. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 3.61 times less risky than Leverage Shares. The stock trades about -0.04 of its potential returns per unit of risk. The Leverage Shares 3x is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 542,550 in Leverage Shares 3x on August 25, 2024 and sell it today you would earn a total of 19,050 from holding Leverage Shares 3x or generate 3.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Leverage Shares 3x
Performance |
| Timeline |
| Microsoft |
| Leverage Shares 3x |
Microsoft and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Leverage Shares
The main advantage of trading using opposite Microsoft and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x | Leverage Shares vs. Leverage Shares 3x |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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