Correlation Between Xtrackers and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both Xtrackers 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 Xtrackers and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtrackers SP 500 and Leverage Shares 3x, you can compare the effects of market volatilities on Xtrackers 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 Xtrackers with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers and Leverage Shares.
Diversification Opportunities for Xtrackers and Leverage Shares
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Xtrackers and Leverage is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers SP 500 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 Xtrackers 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 Xtrackers SP 500 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 Xtrackers i.e., Xtrackers and Leverage Shares go up and down completely randomly.
Pair Corralation between Xtrackers and Leverage Shares
Assuming the 90 days trading horizon Xtrackers is expected to generate 21.92 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Xtrackers SP 500 is 10.19 times less risky than Leverage Shares. It trades about 0.14 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,406,710 in Leverage Shares 3x on August 27, 2024 and sell it today you would earn a total of 1,914,900 from holding Leverage Shares 3x or generate 136.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtrackers SP 500 vs. Leverage Shares 3x
Performance |
| Timeline |
| Xtrackers SP 500 |
| Leverage Shares 3x |
Xtrackers and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtrackers and Leverage Shares
The main advantage of trading using opposite Xtrackers and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers 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.| Xtrackers vs. WisdomTree SP 500 | Xtrackers vs. WisdomTree Silver 3x | Xtrackers vs. Lyxor 10Y Inflation | Xtrackers vs. GraniteShares 3x Long |
| Leverage Shares vs. WisdomTree SP 500 | Leverage Shares vs. WisdomTree Silver 3x | Leverage Shares vs. Lyxor 10Y Inflation | Leverage Shares vs. GraniteShares 3x Long |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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