Correlation Between Leverage Shares and WisdomTree Broad

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Can any of the company-specific risk be diversified away by investing in both Leverage Shares and WisdomTree Broad 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 WisdomTree Broad into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leverage Shares 2x and WisdomTree Broad Commodities, you can compare the effects of market volatilities on Leverage Shares and WisdomTree Broad 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 WisdomTree Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and WisdomTree Broad.

Diversification Opportunities for Leverage Shares and WisdomTree Broad

LeverageWisdomTreeDiversified AwayLeverageWisdomTreeDiversified Away100%
-0.54
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Leverage and WisdomTree is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and WisdomTree Broad Commodities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Broad Com 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 2x are associated (or correlated) with WisdomTree Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Broad Com has no effect on the direction of Leverage Shares i.e., Leverage Shares and WisdomTree Broad go up and down completely randomly.

Pair Corralation between Leverage Shares and WisdomTree Broad

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 5.99 times more return on investment than WisdomTree Broad. However, Leverage Shares is 5.99 times more volatile than WisdomTree Broad Commodities. It trades about 0.12 of its potential returns per unit of risk. WisdomTree Broad Commodities is currently generating about 0.09 per unit of risk. If you would invest  4,794  in Leverage Shares 2x on November 21, 2024 and sell it today you would earn a total of  478.00  from holding Leverage Shares 2x or generate 9.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Leverage Shares 2x  vs.  WisdomTree Broad Commodities

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510152025
JavaScript chart by amCharts 3.21.15AAP2 COMX
       Timeline  
Leverage Shares 2x 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb45505560
WisdomTree Broad Com 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Broad Commodities are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Broad may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb860880900920940960980

Leverage Shares and WisdomTree Broad Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-10.27-7.69-5.11-2.530.04452.635.297.9610.63 0.10.20.30.40.5
JavaScript chart by amCharts 3.21.15AAP2 COMX
       Returns  

Pair Trading with Leverage Shares and WisdomTree Broad

The main advantage of trading using opposite Leverage Shares and WisdomTree Broad positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, WisdomTree Broad 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 WisdomTree Broad will offset losses from the drop in WisdomTree Broad's long position.
The idea behind Leverage Shares 2x and WisdomTree Broad Commodities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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