Correlation Between Leverage Shares and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Leverage Shares 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 Leverage Shares and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leverage Shares 3x and Leverage Shares 2x, you can compare the effects of market volatilities on Leverage Shares 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 Leverage Shares with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Leverage Shares.
Diversification Opportunities for Leverage Shares and Leverage Shares
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leverage and Leverage is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x 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 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 3x 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 Leverage Shares i.e., Leverage Shares and Leverage Shares go up and down completely randomly.
Pair Corralation between Leverage Shares and Leverage Shares
Assuming the 90 days trading horizon Leverage Shares 3x is expected to under-perform the Leverage Shares. In addition to that, Leverage Shares is 4.12 times more volatile than Leverage Shares 2x. It trades about -0.13 of its total potential returns per unit of risk. Leverage Shares 2x is currently generating about -0.09 per unit of volatility. If you would invest 296,275 in Leverage Shares 2x on September 1, 2024 and sell it today you would lose (29,400) from holding Leverage Shares 2x or give up 9.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leverage Shares 3x vs. Leverage Shares 2x
Performance |
| Timeline |
| Leverage Shares 3x |
| Leverage Shares 2x |
Leverage Shares and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leverage Shares and Leverage Shares
The main advantage of trading using opposite Leverage Shares and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares 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.| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 1x |
| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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