Correlation Between SP 500 and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both SP 500 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 SP 500 and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP 500 VIX and Leverage Shares 3x, you can compare the effects of market volatilities on SP 500 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 SP 500 with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and Leverage Shares.
Diversification Opportunities for SP 500 and Leverage Shares
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between VILX and Leverage is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX 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 SP 500 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 SP 500 VIX 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 SP 500 i.e., SP 500 and Leverage Shares go up and down completely randomly.
Pair Corralation between SP 500 and Leverage Shares
Assuming the 90 days trading horizon SP 500 VIX is expected to under-perform the Leverage Shares. But the etf apears to be less risky and, when comparing its historical volatility, SP 500 VIX is 2.61 times less risky than Leverage Shares. The etf trades about -0.27 of its potential returns per unit of risk. The Leverage Shares 3x is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 70,045 in Leverage Shares 3x on September 5, 2024 and sell it today you would earn a total of 185,585 from holding Leverage Shares 3x or generate 264.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SP 500 VIX vs. Leverage Shares 3x
Performance |
| Timeline |
| SP 500 VIX |
| Leverage Shares 3x |
SP 500 and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SP 500 and Leverage Shares
The main advantage of trading using opposite SP 500 and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 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.| SP 500 vs. GraniteShares 3x Short | SP 500 vs. WisdomTree Natural Gas | SP 500 vs. Leverage Shares 3x | SP 500 vs. WisdomTree Natural Gas |
| Leverage Shares vs. Vanguard FTSE Developed | Leverage Shares vs. Leverage Shares 2x | Leverage Shares vs. Amundi Index Solutions | Leverage Shares vs. Amundi Index Solutions |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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