Correlation Between GraniteShares 15x and MicroSectors FANG

Can any of the company-specific risk be diversified away by investing in both GraniteShares 15x and MicroSectors FANG 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 15x and MicroSectors FANG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GraniteShares 15x Long and MicroSectors FANG Index, you can compare the effects of market volatilities on GraniteShares 15x and MicroSectors FANG 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 15x with a short position of MicroSectors FANG. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares 15x and MicroSectors FANG.

Diversification Opportunities for GraniteShares 15x and MicroSectors FANG

0.66

Correlation Coefficient

GraniteShares 15x  MicroSectors FANG

Poor diversification

The 3 months correlation between GraniteShares and MicroSectors is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 15x Long and MicroSectors FANG Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors FANG Index and GraniteShares 15x 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 15x Long are associated (or correlated) with MicroSectors FANG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors FANG Index has no effect on the direction of GraniteShares 15x i.e., GraniteShares 15x and MicroSectors FANG go up and down completely randomly.

Pair Corralation between GraniteShares 15x and MicroSectors FANG

Considering the 90-day investment horizon GraniteShares 15x Long is expected to generate 6.63 times more return on investment than MicroSectors FANG. However, GraniteShares 15x is 6.63 times more volatile than MicroSectors FANG Index. It trades about 0.06 of its potential returns per unit of risk. MicroSectors FANG Index is currently generating about 0.14 per unit of risk. If you would invest  338.00  in GraniteShares 15x Long on September 14, 2024 and sell it today you would earn a total of  3,514  from holding GraniteShares 15x Long or generate 1039.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

GraniteShares 15x Long  vs.  MicroSectors FANG Index

GraniteShares 15x Long

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 15x Long are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, GraniteShares 15x disclosed solid returns over the last few months and may actually be approaching a breakup point.

MicroSectors FANG Index

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GraniteShares 15x and MicroSectors FANG

The main advantage of trading using opposite GraniteShares 15x and MicroSectors FANG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GraniteShares 15x position performs unexpectedly, MicroSectors FANG 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 MicroSectors FANG will offset losses from the drop in MicroSectors FANG's long position.

The idea behind GraniteShares 15x Long and MicroSectors FANG Index 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.