Correlation Between Leverage Shares and GraniteShares FAANG

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

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

Diversification Opportunities for Leverage Shares and GraniteShares FAANG

0.89

Correlation Coefficient

Leverage Shares  GraniteShares FAANG

Very poor diversification

The 3 months correlation between Leverage and GraniteShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Leverage Shares 2x 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 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 2x 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 Leverage Shares i.e., Leverage Shares and GraniteShares FAANG go up and down completely randomly.

Pair Corralation between Leverage Shares and GraniteShares FAANG

Assuming the 90 days trading horizon Leverage Shares 2x is expected to generate 2.68 times more return on investment than GraniteShares FAANG. However, Leverage Shares is 2.68 times more volatile than GraniteShares FAANG ETC. It trades about 0.08 of its potential returns per unit of risk. GraniteShares FAANG ETC is currently generating about 0.15 per unit of risk. If you would invest  258,750  in Leverage Shares 2x on October 4, 2024 and sell it today you would earn a total of  570,100  from holding Leverage Shares 2x or generate 220.33% return on investment over 90 days.

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

Leverage Shares 2x  vs.  GraniteShares FAANG ETC

Leverage Shares 2x

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 2x are ranked lower than 12 (%) 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.

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 Leverage Shares and GraniteShares FAANG

The main advantage of trading using opposite Leverage Shares and GraniteShares FAANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leverage Shares 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 Leverage Shares 2x 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.