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 2x and Invesco FTSE RAFI, 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
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Leverage and Invesco is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI 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 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 RAFI 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 2x is expected to under-perform the Invesco FTSE. In addition to that, Leverage Shares is 3.62 times more volatile than Invesco FTSE RAFI. It trades about -0.05 of its total potential returns per unit of risk. Invesco FTSE RAFI is currently generating about 0.36 per unit of volatility. If you would invest 222,325 in Invesco FTSE RAFI on August 28, 2024 and sell it today you would earn a total of 10,050 from holding Invesco FTSE RAFI or generate 4.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 2x vs. Invesco FTSE RAFI
Performance |
| Timeline |
| Leverage Shares 2x |
| Invesco FTSE RAFI |
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 2x | Invesco FTSE vs. WisdomTree Silver 3x | Invesco FTSE vs. Leverage Shares 2x | Invesco FTSE vs. WisdomTree SP 500 |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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