Correlation Between WisdomTree and GraniteShares

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

By analyzing existing cross correlation between WisdomTree SP 500 and GraniteShares 3x Short, you can compare the effects of market volatilities on WisdomTree and GraniteShares 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 WisdomTree with a short position of GraniteShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and GraniteShares.

Diversification Opportunities for WisdomTree and GraniteShares

0.55

Correlation Coefficient

WisdomTree  GraniteShares

Very weak diversification

The 3 months correlation between WisdomTree and GraniteShares is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and GraniteShares 3x Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 3x Short and WisdomTree 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 WisdomTree SP 500 are associated (or correlated) with GraniteShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 3x Short has no effect on the direction of WisdomTree i.e., WisdomTree and GraniteShares go up and down completely randomly.

Pair Corralation between WisdomTree and GraniteShares

Assuming the 90 days trading horizon WisdomTree is expected to generate 2.51 times less return on investment than GraniteShares. But when comparing it to its historical volatility, WisdomTree SP 500 is 1.57 times less risky than GraniteShares. It trades about 0.05 of its potential returns per unit of risk. GraniteShares 3x Short is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,751  in GraniteShares 3x Short on December 28, 2024 and sell it today you would earn a total of  289.00  from holding GraniteShares 3x Short or generate 16.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

WisdomTree SP 500  vs.  GraniteShares 3x Short

WisdomTree SP 500

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GraniteShares 3x Short

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Short are ranked lower than 5 (%) 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.

Pair Trading with WisdomTree and GraniteShares

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

The idea behind WisdomTree SP 500 and GraniteShares 3x Short 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.