Correlation Between GraniteShares and Leverage Shares

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Can any of the company-specific risk be diversified away by investing in both GraniteShares 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 GraniteShares and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GraniteShares 3x Long and Leverage Shares 1x, you can compare the effects of market volatilities on GraniteShares 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 GraniteShares with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares and Leverage Shares.

Diversification Opportunities for GraniteShares and Leverage Shares

GraniteSharesLeverageDiversified AwayGraniteSharesLeverageDiversified Away100%
-0.9
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between GraniteShares and Leverage is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Long and Leverage Shares 1x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 1x and GraniteShares 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 GraniteShares 3x Long 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 1x has no effect on the direction of GraniteShares i.e., GraniteShares and Leverage Shares go up and down completely randomly.

Pair Corralation between GraniteShares and Leverage Shares

Assuming the 90 days trading horizon GraniteShares 3x Long is expected to generate 2.4 times more return on investment than Leverage Shares. However, GraniteShares is 2.4 times more volatile than Leverage Shares 1x. It trades about 0.16 of its potential returns per unit of risk. Leverage Shares 1x is currently generating about -0.06 per unit of risk. If you would invest  664,450  in GraniteShares 3x Long on November 29, 2024 and sell it today you would earn a total of  784,950  from holding GraniteShares 3x Long or generate 118.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

GraniteShares 3x Long  vs.  Leverage Shares 1x

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -100102030405060
JavaScript chart by amCharts 3.21.153LBC SJPE
       Timeline  
GraniteShares 3x Long 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Long are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, GraniteShares unveiled solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9,00010,00011,00012,00013,00014,00015,000
Leverage Shares 1x 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Leverage Shares 1x has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leverage Shares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb2.12.152.22.252.32.352.42.452.5

GraniteShares and Leverage Shares Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-16.93-12.68-8.43-4.18-0.07084.439.013.5818.1622.74 0.050.100.15
JavaScript chart by amCharts 3.21.153LBC SJPE
       Returns  

Pair Trading with GraniteShares and Leverage Shares

The main advantage of trading using opposite GraniteShares and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GraniteShares 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 GraniteShares 3x Long and Leverage Shares 1x 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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