Correlation Between Leverage Shares and HSBC FTSE

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

Diversification Opportunities for Leverage Shares and HSBC FTSE

-0.61

Correlation Coefficient

Leverage Shares  HSBC FTSE

Excellent diversification

The 3 months correlation between Leverage and HSBC is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 3x and HSBC FTSE EPRA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSBC FTSE EPRA 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 HSBC FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSBC FTSE EPRA has no effect on the direction of Leverage Shares i.e., Leverage Shares and HSBC FTSE go up and down completely randomly.

Pair Corralation between Leverage Shares and HSBC FTSE

Assuming the 90 days trading horizon Leverage Shares 3x is expected to generate 10.23 times more return on investment than HSBC FTSE. However, Leverage Shares is 10.23 times more volatile than HSBC FTSE EPRA. It trades about 0.11 of its potential returns per unit of risk. HSBC FTSE EPRA is currently generating about 0.03 per unit of risk. If you would invest  1,910  in Leverage Shares 3x on September 3, 2024 and sell it today you would earn a total of  4,502  from holding Leverage Shares 3x or generate 235.71% 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.  HSBC FTSE EPRA

Leverage Shares 3x

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 10 (%) 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.

HSBC FTSE EPRA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HSBC FTSE EPRA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HSBC FTSE is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Leverage Shares and HSBC FTSE

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

The idea behind Leverage Shares 3x and HSBC FTSE EPRA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.