Correlation Between Leverage Shares and Xtrackers FTSE
Can any of the company-specific risk be diversified away by investing in both Leverage Shares and Xtrackers 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 Xtrackers 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 Xtrackers FTSE 250, you can compare the effects of market volatilities on Leverage Shares and Xtrackers 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 Xtrackers FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Xtrackers FTSE.
Diversification Opportunities for Leverage Shares and Xtrackers FTSE
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leverage and Xtrackers is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and Xtrackers FTSE 250 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE 250 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 Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE 250 has no effect on the direction of Leverage Shares i.e., Leverage Shares and Xtrackers FTSE go up and down completely randomly.
Pair Corralation between Leverage Shares and Xtrackers FTSE
Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 3.12 times more return on investment than Xtrackers FTSE. However, Leverage Shares is 3.12 times more volatile than Xtrackers FTSE 250. It trades about 0.02 of its potential returns per unit of risk. Xtrackers FTSE 250 is currently generating about -0.05 per unit of risk. If you would invest 4,986 in Leverage Shares 2x on August 30, 2024 and sell it today you would earn a total of 33.00 from holding Leverage Shares 2x or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 2x vs. Xtrackers FTSE 250
Performance |
| Timeline |
| Leverage Shares 2x |
| Xtrackers FTSE 250 |
Leverage Shares and Xtrackers FTSE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and Xtrackers FTSE
The main advantage of trading using opposite Leverage Shares and Xtrackers FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, Xtrackers 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 Xtrackers FTSE will offset losses from the drop in Xtrackers 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 |
| Xtrackers FTSE vs. Vanguard FTSE Developed | Xtrackers FTSE vs. Leverage Shares 2x | Xtrackers FTSE vs. Amundi Index Solutions | Xtrackers FTSE vs. Amundi Index Solutions |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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