Correlation Between Leverage Shares and Hornby PLC
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and Hornby PLC 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 Hornby PLC 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 Hornby PLC, you can compare the effects of market volatilities on Leverage Shares and Hornby PLC 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 Hornby PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Hornby PLC.
Diversification Opportunities for Leverage Shares and Hornby PLC
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leverage and Hornby is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and Hornby PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hornby PLC 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 Hornby PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hornby PLC has no effect on the direction of Leverage Shares i.e., Leverage Shares and Hornby PLC go up and down completely randomly.
Pair Corralation between Leverage Shares and Hornby PLC
Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 5.51 times more return on investment than Hornby PLC. However, Leverage Shares is 5.51 times more volatile than Hornby PLC. It trades about 0.05 of its potential returns per unit of risk. Hornby PLC is currently generating about 0.05 per unit of risk. If you would invest 3,739 in Leverage Shares 2x on August 27, 2024 and sell it today you would earn a total of 1,067 from holding Leverage Shares 2x or generate 28.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 2x vs. Hornby PLC
Performance |
| Timeline |
| Leverage Shares 2x |
| Hornby PLC |
Leverage Shares and Hornby PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and Hornby PLC
The main advantage of trading using opposite Leverage Shares and Hornby PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, Hornby PLC 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 Hornby PLC will offset losses from the drop in Hornby PLC's long position.| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x | Leverage Shares vs. Lyxor 10Y Inflation |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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