Correlation Between Legal General and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Legal General and Leverage Shares 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 Legal General and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legal General UCITS and Leverage Shares 3x, you can compare the effects of market volatilities on Legal General and Leverage Shares 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 Legal General with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legal General and Leverage Shares.
Diversification Opportunities for Legal General and Leverage Shares
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legal and Leverage is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Legal General UCITS and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x and Legal General 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 Legal General UCITS are associated (or correlated) with Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of Legal General i.e., Legal General and Leverage Shares go up and down completely randomly.
Pair Corralation between Legal General and Leverage Shares
Assuming the 90 days trading horizon Legal General UCITS is expected to under-perform the Leverage Shares. But the etf apears to be less risky and, when comparing its historical volatility, Legal General UCITS is 18.4 times less risky than Leverage Shares. The etf trades about -0.02 of its potential returns per unit of risk. The Leverage Shares 3x is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 80,640 in Leverage Shares 3x on September 4, 2024 and sell it today you would earn a total of 3,744,995 from holding Leverage Shares 3x or generate 4644.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legal General UCITS vs. Leverage Shares 3x
Performance |
| Timeline |
| Legal General UCITS |
| Leverage Shares 3x |
Legal General and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legal General and Leverage Shares
The main advantage of trading using opposite Legal General and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legal General position performs unexpectedly, Leverage Shares 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 Leverage Shares will offset losses from the drop in Leverage Shares' long position.| Legal General vs. Leverage Shares 3x | Legal General vs. WisdomTree Natural Gas | Legal General vs. Leverage Shares 3x | Legal General vs. GraniteShares 3x Short |
| Leverage Shares vs. Vanguard FTSE Developed | Leverage Shares vs. Leverage Shares 2x | Leverage Shares vs. Amundi Index Solutions | Leverage Shares 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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