Correlation Between LS 1x and GraniteShares FAANG

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

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

Diversification Opportunities for LS 1x and GraniteShares FAANG

0.97

Correlation Coefficient

LS 1x  GraniteShares FAANG

Almost no diversification

The 3 months correlation between 1AMZ and GraniteShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding LS 1x Amazon and GraniteShares FAANG ETC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares FAANG ETC and LS 1x 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 LS 1x Amazon are associated (or correlated) with GraniteShares FAANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares FAANG ETC has no effect on the direction of LS 1x i.e., LS 1x and GraniteShares FAANG go up and down completely randomly.

Pair Corralation between LS 1x and GraniteShares FAANG

Assuming the 90 days trading horizon LS 1x is expected to generate 1.02 times less return on investment than GraniteShares FAANG. In addition to that, LS 1x is 1.56 times more volatile than GraniteShares FAANG ETC. It trades about 0.09 of its total potential returns per unit of risk. GraniteShares FAANG ETC is currently generating about 0.15 per unit of volatility. If you would invest  1,896  in GraniteShares FAANG ETC on October 4, 2024 and sell it today you would earn a total of  3,261  from holding GraniteShares FAANG ETC or generate 171.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

LS 1x Amazon  vs.  GraniteShares FAANG ETC

LS 1x Amazon

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Amazon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

GraniteShares FAANG ETC

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares FAANG ETC are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GraniteShares FAANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LS 1x and GraniteShares FAANG

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

The idea behind LS 1x Amazon and GraniteShares FAANG ETC 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 Transaction History module to view history of all your transactions and understand their impact on performance.