Correlation Between Vanguard FTSE and Leverage Shares

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

By analyzing existing cross correlation between Vanguard FTSE Developed and Leverage Shares 2x, you can compare the effects of market volatilities on Vanguard FTSE 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 Vanguard FTSE with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Leverage Shares.

Diversification Opportunities for Vanguard FTSE and Leverage Shares

0.01

Correlation Coefficient

Vanguard FTSE  Leverage Shares

Significant diversification

The 3 months correlation between Vanguard and Leverage is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Leverage Shares 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 2x and Vanguard FTSE 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 Vanguard FTSE Developed 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 2x has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Leverage Shares go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Leverage Shares

Assuming the 90 days trading horizon Vanguard FTSE Developed is expected to under-perform the Leverage Shares. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 2.94 times less risky than Leverage Shares. The etf trades about -0.1 of its potential returns per unit of risk. The Leverage Shares 2x is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,687  in Leverage Shares 2x on September 3, 2024 and sell it today you would earn a total of  550.00  from holding Leverage Shares 2x or generate 11.73% return on investment over 90 days.

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

Vanguard FTSE Developed  vs.  Leverage Shares 2x

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

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

Leverage Shares 2x

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 6 (%) 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 Vanguard FTSE and Leverage Shares

The main advantage of trading using opposite Vanguard FTSE and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 Vanguard FTSE Developed and Leverage Shares 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.