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 GLOBAL, 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
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leverage and FIRST is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and FIRST TRUST GLOBAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIRST TRUST 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 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 GLOBAL 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 20.43 times more return on investment than FIRST TRUST. However, Leverage Shares is 20.43 times more volatile than FIRST TRUST GLOBAL. It trades about 0.16 of its potential returns per unit of risk. FIRST TRUST GLOBAL is currently generating about 0.09 per unit of risk. If you would invest 213,300 in Leverage Shares 3x on September 20, 2024 and sell it today you would earn a total of 5,096,710 from holding Leverage Shares 3x or generate 2389.46% 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 GLOBAL
Performance |
| Timeline |
| Leverage Shares 3x |
| FIRST TRUST GLOBAL |
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. WisdomTree Natural Gas | Leverage Shares vs. WisdomTree Natural Gas | Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x |
| FIRST TRUST vs. GraniteShares 3x Short | FIRST TRUST vs. WisdomTree Natural Gas | FIRST TRUST vs. Leverage Shares 3x | FIRST TRUST vs. WisdomTree Natural Gas |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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