Correlation Between Leverage Shares and VPC Specialty

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and VPC Specialty 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 VPC Specialty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leverage Shares 2x and VPC Specialty Lending, you can compare the effects of market volatilities on Leverage Shares and VPC Specialty 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 VPC Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and VPC Specialty.

Diversification Opportunities for Leverage Shares and VPC Specialty

0.83

Correlation Coefficient

Leverage Shares  VPC Specialty

Very poor diversification

The 3 months correlation between Leverage and VPC is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and VPC Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VPC Specialty Lending 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 2x are associated (or correlated) with VPC Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VPC Specialty Lending has no effect on the direction of Leverage Shares i.e., Leverage Shares and VPC Specialty go up and down completely randomly.

Pair Corralation between Leverage Shares and VPC Specialty

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 1.94 times more return on investment than VPC Specialty. However, Leverage Shares is 1.94 times more volatile than VPC Specialty Lending. It trades about 0.08 of its potential returns per unit of risk. VPC Specialty Lending is currently generating about -0.04 per unit of risk. If you would invest  2,171  in Leverage Shares 2x on April 20, 2025 and sell it today you would earn a total of  4,629  from holding Leverage Shares 2x or generate 213.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

Leverage Shares 2x  vs.  VPC Specialty Lending

Leverage Shares 2x

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Leverage Shares exhibited solid returns over the last few months and may actually be approaching a breakup point.

VPC Specialty Lending

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VPC Specialty Lending are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, VPC Specialty exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leverage Shares and VPC Specialty

The main advantage of trading using opposite Leverage Shares and VPC Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, VPC Specialty 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 VPC Specialty will offset losses from the drop in VPC Specialty's long position.

The idea behind Leverage Shares 2x and VPC Specialty Lending pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..