Correlation Between Leverage Shares and ETC Group
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and ETC Group 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 ETC Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leverage Shares 3x and ETC Group Global, you can compare the effects of market volatilities on Leverage Shares and ETC Group 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 ETC Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and ETC Group.
Diversification Opportunities for Leverage Shares and ETC Group
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leverage and ETC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and ETC Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETC Group Global 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 3x are associated (or correlated) with ETC Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETC Group Global has no effect on the direction of Leverage Shares i.e., Leverage Shares and ETC Group go up and down completely randomly.
Pair Corralation between Leverage Shares and ETC Group
Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 4.38 times more return on investment than ETC Group. However, Leverage Shares is 4.38 times more volatile than ETC Group Global. It trades about 0.37 of its potential returns per unit of risk. ETC Group Global is currently generating about 0.43 per unit of risk. If you would invest 1,857 in Leverage Shares 3x on September 3, 2024 and sell it today you would earn a total of 1,578 from holding Leverage Shares 3x or generate 84.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Leverage Shares 3x vs. ETC Group Global
Performance |
| Timeline |
| Leverage Shares 3x |
| ETC Group Global |
Leverage Shares and ETC Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and ETC Group
The main advantage of trading using opposite Leverage Shares and ETC Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, ETC Group 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 ETC Group will offset losses from the drop in ETC Group's long position.| Leverage Shares vs. Vanguard FTSE Developed | Leverage Shares vs. Leverage Shares 2x | Leverage Shares vs. Amundi Index Solutions | Leverage Shares vs. Amundi Index Solutions |
| ETC Group vs. ETC on CMCI | ETC Group vs. ETC on CMCI | ETC Group vs. ETC on CMCI | ETC Group vs. ETC Group Global |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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