Correlation Between WisdomTree and LS 1x

Can any of the company-specific risk be diversified away by investing in both WisdomTree and LS 1x 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 and LS 1x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree SP 500 and LS 1x Tesla, you can compare the effects of market volatilities on WisdomTree and LS 1x 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 with a short position of LS 1x. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and LS 1x.

Diversification Opportunities for WisdomTree and LS 1x

-0.32

Correlation Coefficient

WisdomTree  LS 1x

Very good diversification

The 3 months correlation between WisdomTree and 1TSL is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and LS 1x Tesla in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LS 1x Tesla and WisdomTree 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 SP 500 are associated (or correlated) with LS 1x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LS 1x Tesla has no effect on the direction of WisdomTree i.e., WisdomTree and LS 1x go up and down completely randomly.

Pair Corralation between WisdomTree and LS 1x

Assuming the 90 days trading horizon WisdomTree SP 500 is expected to under-perform the LS 1x. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree SP 500 is 1.17 times less risky than LS 1x. The etf trades about -0.01 of its potential returns per unit of risk. The LS 1x Tesla is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,042  in LS 1x Tesla on October 22, 2024 and sell it today you would earn a total of  25.00  from holding LS 1x Tesla or generate 2.4% return on investment over 90 days.

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

WisdomTree SP 500  vs.  LS 1x Tesla

WisdomTree SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WisdomTree is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

LS 1x Tesla

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Tesla are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree and LS 1x

The main advantage of trading using opposite WisdomTree and LS 1x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree position performs unexpectedly, LS 1x 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 LS 1x will offset losses from the drop in LS 1x's long position.

The idea behind WisdomTree SP 500 and LS 1x Tesla 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.