Correlation Between GraniteShares and IShares MSCI

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

By analyzing existing cross correlation between GraniteShares 3x Short and iShares MSCI Japan, you can compare the effects of market volatilities on GraniteShares and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares and IShares MSCI.

Diversification Opportunities for GraniteShares and IShares MSCI

-0.46

Correlation Coefficient

GraniteShares  IShares MSCI

Very good diversification

The 3 months correlation between GraniteShares and IShares is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Short and iShares MSCI Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Japan 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 Short are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Japan has no effect on the direction of GraniteShares i.e., GraniteShares and IShares MSCI go up and down completely randomly.

Pair Corralation between GraniteShares and IShares MSCI

Assuming the 90 days trading horizon GraniteShares 3x Short is expected to generate 14.82 times more return on investment than IShares MSCI. However, GraniteShares is 14.82 times more volatile than iShares MSCI Japan. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI Japan is currently generating about -0.02 per unit of risk. If you would invest  63,088  in GraniteShares 3x Short on December 3, 2024 and sell it today you would lose (1,500) from holding GraniteShares 3x Short or give up 2.38% of portfolio value over 90 days.

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

GraniteShares 3x Short  vs.  iShares MSCI Japan

GraniteShares 3x Short

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Short are ranked lower than 3 (%) 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.

iShares MSCI Japan

Risk-Adjusted Performance

Very Weak

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

Pair Trading with GraniteShares and IShares MSCI

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

The idea behind GraniteShares 3x Short and iShares MSCI Japan 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.