Correlation Between GraniteShares and Xtrackers

Can any of the company-specific risk be diversified away by investing in both GraniteShares and Xtrackers 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 Xtrackers 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 Xtrackers SP 500, you can compare the effects of market volatilities on GraniteShares and Xtrackers 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 Xtrackers. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares and Xtrackers.

Diversification Opportunities for GraniteShares and Xtrackers

-0.25

Correlation Coefficient

GraniteShares  Xtrackers

Very good diversification

The 3 months correlation between GraniteShares and Xtrackers is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Short and Xtrackers SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP 500 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 Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP 500 has no effect on the direction of GraniteShares i.e., GraniteShares and Xtrackers go up and down completely randomly.

Pair Corralation between GraniteShares and Xtrackers

Assuming the 90 days trading horizon GraniteShares 3x Short is expected to under-perform the Xtrackers. In addition to that, GraniteShares is 9.97 times more volatile than Xtrackers SP 500. It trades about -0.02 of its total potential returns per unit of risk. Xtrackers SP 500 is currently generating about 0.11 per unit of volatility. If you would invest  1,082  in Xtrackers SP 500 on October 24, 2024 and sell it today you would earn a total of  19.00  from holding Xtrackers SP 500 or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

GraniteShares 3x Short  vs.  Xtrackers SP 500

GraniteShares 3x Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GraniteShares 3x Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GraniteShares is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Xtrackers SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Xtrackers 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 GraniteShares and Xtrackers

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

The idea behind GraniteShares 3x Short and Xtrackers SP 500 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.