Correlation Between GraniteShares Gold and Western Asset

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

By analyzing existing cross correlation between GraniteShares Gold Trust and Western Asset High, you can compare the effects of market volatilities on GraniteShares Gold and Western Asset 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 Gold with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares Gold and Western Asset.

Diversification Opportunities for GraniteShares Gold and Western Asset

0.87

Correlation Coefficient

GraniteShares Gold  Western Asset

Very poor diversification

The 3 months correlation between GraniteShares and Western is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares Gold Trust and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and GraniteShares Gold 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 Gold Trust are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of GraniteShares Gold i.e., GraniteShares Gold and Western Asset go up and down completely randomly.

Pair Corralation between GraniteShares Gold and Western Asset

Considering the 90-day investment horizon GraniteShares Gold Trust is expected to generate 1.9 times more return on investment than Western Asset. However, GraniteShares Gold is 1.9 times more volatile than Western Asset High. It trades about 0.16 of its potential returns per unit of risk. Western Asset High is currently generating about 0.08 per unit of risk. If you would invest  2,602  in GraniteShares Gold Trust on December 1, 2024 and sell it today you would earn a total of  216.00  from holding GraniteShares Gold Trust or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

GraniteShares Gold Trust  vs.  Western Asset High

GraniteShares Gold Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares Gold Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, GraniteShares Gold may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Western Asset High

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GraniteShares Gold and Western Asset

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

The idea behind GraniteShares Gold Trust and Western Asset High 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.