Correlation Between WisdomTree Short and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both WisdomTree Short 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 WisdomTree Short and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Short GBP and Leverage Shares 5x, you can compare the effects of market volatilities on WisdomTree Short 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 WisdomTree Short with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Short and Leverage Shares.
Diversification Opportunities for WisdomTree Short and Leverage Shares
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WisdomTree and Leverage is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Short GBP and Leverage Shares 5x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 5x and WisdomTree Short 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 WisdomTree Short GBP 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 5x has no effect on the direction of WisdomTree Short i.e., WisdomTree Short and Leverage Shares go up and down completely randomly.
Pair Corralation between WisdomTree Short and Leverage Shares
Assuming the 90 days trading horizon WisdomTree Short is expected to generate 6.38 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, WisdomTree Short GBP is 12.24 times less risky than Leverage Shares. It trades about 0.22 of its potential returns per unit of risk. Leverage Shares 5x is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 10,364 in Leverage Shares 5x on August 28, 2024 and sell it today you would earn a total of 3,499 from holding Leverage Shares 5x or generate 33.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WisdomTree Short GBP vs. Leverage Shares 5x
Performance |
| Timeline |
| WisdomTree Short GBP |
| Leverage Shares 5x |
WisdomTree Short and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Short and Leverage Shares
The main advantage of trading using opposite WisdomTree Short and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Short 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.| WisdomTree Short vs. Leverage Shares 3x | WisdomTree Short vs. WisdomTree SP 500 | WisdomTree Short vs. WisdomTree Silver 3x | WisdomTree Short vs. Leverage Shares 3x |
| Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x | Leverage Shares vs. Lyxor 10Y Inflation | Leverage Shares vs. GraniteShares 3x Short |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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