Correlation Between Leverage Shares and First Trust
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and First Trust 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 First Trust 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 First Trust Nasdaq, you can compare the effects of market volatilities on Leverage Shares and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and First Trust.
Diversification Opportunities for Leverage Shares and First Trust
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leverage and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Leverage Shares i.e., Leverage Shares and First Trust go up and down completely randomly.
Pair Corralation between Leverage Shares and First Trust
Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 10.79 times more return on investment than First Trust. However, Leverage Shares is 10.79 times more volatile than First Trust Nasdaq. It trades about 0.12 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.07 per unit of risk. If you would invest 97,775 in Leverage Shares 3x on August 31, 2024 and sell it today you would earn a total of 395,275 from holding Leverage Shares 3x or generate 404.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 3x vs. First Trust Nasdaq
Performance |
| Timeline |
| Leverage Shares 3x |
| First Trust Nasdaq |
Leverage Shares and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and First Trust
The main advantage of trading using opposite Leverage Shares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x |
| First Trust vs. Leverage Shares 3x | First Trust vs. WisdomTree Natural Gas | First Trust vs. GraniteShares 3x Short | First Trust 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |