Correlation Between Leverage Shares and Invesco FTSE
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and Invesco FTSE 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 Invesco FTSE 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 Invesco FTSE Emerging, you can compare the effects of market volatilities on Leverage Shares and Invesco FTSE 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 Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Invesco FTSE.
Diversification Opportunities for Leverage Shares and Invesco FTSE
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Leverage and Invesco is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and Invesco FTSE Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE Emerging 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 Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE Emerging has no effect on the direction of Leverage Shares i.e., Leverage Shares and Invesco FTSE go up and down completely randomly.
Pair Corralation between Leverage Shares and Invesco FTSE
Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 17.6 times more return on investment than Invesco FTSE. However, Leverage Shares is 17.6 times more volatile than Invesco FTSE Emerging. It trades about 0.32 of its potential returns per unit of risk. Invesco FTSE Emerging is currently generating about -0.19 per unit of risk. If you would invest 1,234,980 in Leverage Shares 3x on August 25, 2024 and sell it today you would earn a total of 2,086,630 from holding Leverage Shares 3x or generate 168.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 3x vs. Invesco FTSE Emerging
Performance |
| Timeline |
| Leverage Shares 3x |
| Invesco FTSE Emerging |
Leverage Shares and Invesco FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and Invesco FTSE
The main advantage of trading using opposite Leverage Shares and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, Invesco FTSE 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 Invesco FTSE will offset losses from the drop in Invesco FTSE'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 |
| Invesco FTSE vs. Leverage Shares 3x | Invesco FTSE vs. Leverage Shares 3x | Invesco FTSE vs. Leverage Shares 3x | Invesco FTSE vs. WisdomTree Short GBP |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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