Correlation Between Global X and Leverage Shares

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

By analyzing existing cross correlation between Global X FinTech and Leverage Shares 3x, you can compare the effects of market volatilities on Global X 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 Global X with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Leverage Shares.

Diversification Opportunities for Global X and Leverage Shares

0.95

Correlation Coefficient

Global X  Leverage Shares

Almost no diversification

The 3 months correlation between Global and Leverage is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Global X FinTech 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 Global X 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 Global X FinTech 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 Global X i.e., Global X and Leverage Shares go up and down completely randomly.

Pair Corralation between Global X and Leverage Shares

Assuming the 90 days trading horizon Global X is expected to generate 4.9 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, Global X FinTech is 5.2 times less risky than Leverage Shares. It trades about 0.26 of its potential returns per unit of risk. Leverage Shares 3x is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,622  in Leverage Shares 3x on September 12, 2024 and sell it today you would earn a total of  2,382  from holding Leverage Shares 3x or generate 146.86% return on investment over 90 days.

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

Global X FinTech  vs.  Leverage Shares 3x

Global X FinTech

Risk-Adjusted Performance

20 of 100

Solid

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

Leverage Shares 3x

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 19 (%) 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.

Pair Trading with Global X and Leverage Shares

The main advantage of trading using opposite Global X and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.

The idea behind Global X FinTech and Leverage Shares 3x 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.