Correlation Between Leverage Shares and First Trust

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

By analyzing existing cross correlation between Leverage Shares 5x and First Trust Capital, you can compare the effects of market volatilities on Leverage Shares and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leverage Shares and First Trust.

Diversification Opportunities for Leverage Shares and First Trust

0.39

Correlation Coefficient

Leverage Shares  First Trust

Weak diversification

The 3 months correlation between Leverage and First is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 5x and First Trust Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Capital 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 5x are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Capital has no effect on the direction of Leverage Shares i.e., Leverage Shares and First Trust go up and down completely randomly.

Pair Corralation between Leverage Shares and First Trust

Assuming the 90 days trading horizon Leverage Shares 5x is expected to generate 6.13 times more return on investment than First Trust. However, Leverage Shares is 6.13 times more volatile than First Trust Capital. It trades about 0.29 of its potential returns per unit of risk. First Trust Capital is currently generating about 0.08 per unit of risk. If you would invest  64.00  in Leverage Shares 5x on April 24, 2025 and sell it today you would earn a total of  81.00  from holding Leverage Shares 5x or generate 126.56% return on investment over 90 days.

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

Leverage Shares 5x  vs.  First Trust Capital

Leverage Shares 5x

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 5x are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Leverage Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Trust Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Trust is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Leverage Shares and First Trust

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

The idea behind Leverage Shares 5x and First Trust Capital 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.