Correlation Between First Trust and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Value and Leverage Shares 2x, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Leverage Shares.
Diversification Opportunities for First Trust and Leverage Shares
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Leverage is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Value and Leverage Shares 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 2x and First Trust 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 First Trust Value 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 2x has no effect on the direction of First Trust i.e., First Trust and Leverage Shares go up and down completely randomly.
Pair Corralation between First Trust and Leverage Shares
Assuming the 90 days trading horizon First Trust is expected to generate 12.34 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, First Trust Value is 9.43 times less risky than Leverage Shares. It trades about 0.12 of its potential returns per unit of risk. Leverage Shares 2x is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 888.00 in Leverage Shares 2x on September 4, 2024 and sell it today you would earn a total of 4,880 from holding Leverage Shares 2x or generate 549.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
First Trust Value vs. Leverage Shares 2x
Performance |
| Timeline |
| First Trust Value |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Leverage Shares 2x |
First Trust and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Leverage Shares
The main advantage of trading using opposite First Trust and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.The idea behind First Trust Value and Leverage Shares 2x 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.| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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