Correlation Between Leverage Shares and WisdomTree Aluminium

Can any of the company-specific risk be diversified away by investing in both Leverage Shares and WisdomTree Aluminium 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 WisdomTree Aluminium 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 WisdomTree Aluminium 2x, you can compare the effects of market volatilities on Leverage Shares and WisdomTree Aluminium 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 WisdomTree Aluminium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and WisdomTree Aluminium.

Diversification Opportunities for Leverage Shares and WisdomTree Aluminium

-0.66

Correlation Coefficient

Leverage Shares  WisdomTree Aluminium

Excellent diversification

The 3 months correlation between Leverage and WisdomTree is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and WisdomTree Aluminium 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Aluminium 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 WisdomTree Aluminium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Aluminium has no effect on the direction of Leverage Shares i.e., Leverage Shares and WisdomTree Aluminium go up and down completely randomly.

Pair Corralation between Leverage Shares and WisdomTree Aluminium

Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 5.22 times more return on investment than WisdomTree Aluminium. However, Leverage Shares is 5.22 times more volatile than WisdomTree Aluminium 2x. It trades about 0.08 of its potential returns per unit of risk. WisdomTree Aluminium 2x is currently generating about -0.29 per unit of risk. If you would invest  5,419,770  in Leverage Shares 3x on October 7, 2024 and sell it today you would earn a total of  399,720  from holding Leverage Shares 3x or generate 7.38% return on investment over 90 days.

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

Leverage Shares 3x  vs.  WisdomTree Aluminium 2x

Leverage Shares 3x

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 22 (%) 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.

WisdomTree Aluminium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Aluminium 2x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Leverage Shares and WisdomTree Aluminium

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

The idea behind Leverage Shares 3x and WisdomTree Aluminium 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.