Correlation Between Leverage Shares and Global X

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and Global X 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 Global X into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Leverage Shares 2x and Global X Copper, you can compare the effects of market volatilities on Leverage Shares and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and Global X.

Diversification Opportunities for Leverage Shares and Global X

0.42

Correlation Coefficient

Leverage Shares  Global X

Very weak diversification

The 3 months correlation between Leverage and Global is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x and Global X Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Copper 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 2x are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Copper has no effect on the direction of Leverage Shares i.e., Leverage Shares and Global X go up and down completely randomly.

Pair Corralation between Leverage Shares and Global X

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 1.19 times more return on investment than Global X. However, Leverage Shares is 1.19 times more volatile than Global X Copper. It trades about 0.11 of its potential returns per unit of risk. Global X Copper is currently generating about 0.07 per unit of risk. If you would invest  4,472  in Leverage Shares 2x on September 4, 2024 and sell it today you would earn a total of  765.00  from holding Leverage Shares 2x or generate 17.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Leverage Shares 2x  vs.  Global X Copper

Leverage Shares 2x

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Global X Copper

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Copper are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Leverage Shares and Global X

The main advantage of trading using opposite Leverage Shares and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares position performs unexpectedly, Global X 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 Global X will offset losses from the drop in Global X's long position.

The idea behind Leverage Shares 2x and Global X Copper 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.