Correlation Between Leverage Shares and Xtrackers
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and Xtrackers 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 Xtrackers 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 Xtrackers SP 500, you can compare the effects of market volatilities on Leverage Shares and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Xtrackers.
Diversification Opportunities for Leverage Shares and Xtrackers
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Leverage and Xtrackers is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of Leverage Shares i.e., Leverage Shares and Xtrackers go up and down completely randomly.
Pair Corralation between Leverage Shares and Xtrackers
Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 10.2 times more return on investment than Xtrackers. However, Leverage Shares is 10.2 times more volatile than Xtrackers SP 500. It trades about 0.32 of its potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.11 per unit of risk. If you would invest 1,226,530 in Leverage Shares 3x on August 24, 2024 and sell it today you would earn a total of 1,994,050 from holding Leverage Shares 3x or generate 162.58% 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. Xtrackers SP 500
Performance |
| Timeline |
| Leverage Shares 3x |
| Xtrackers SP 500 |
Leverage Shares and Xtrackers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and Xtrackers
The main advantage of trading using opposite Leverage Shares and Xtrackers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, Xtrackers 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 Xtrackers will offset losses from the drop in Xtrackers' long position.| Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x | Leverage Shares vs. Lyxor 10Y Inflation | Leverage Shares vs. GraniteShares 3x Long |
| Xtrackers vs. Leverage Shares 3x | Xtrackers vs. WisdomTree SP 500 | Xtrackers vs. WisdomTree Silver 3x | Xtrackers vs. Lyxor 10Y Inflation |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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