Correlation Between MicroSectors FANG and GraniteShares 15x

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

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

Diversification Opportunities for MicroSectors FANG and GraniteShares 15x

0.52

Correlation Coefficient

MicroSectors FANG  GraniteShares 15x

Very weak diversification

The 3 months correlation between MicroSectors and GraniteShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and GraniteShares 15x Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 15x Long and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with GraniteShares 15x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 15x Long has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and GraniteShares 15x go up and down completely randomly.

Pair Corralation between MicroSectors FANG and GraniteShares 15x

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 1.17 times more return on investment than GraniteShares 15x. However, MicroSectors FANG is 1.17 times more volatile than GraniteShares 15x Long. It trades about 0.11 of its potential returns per unit of risk. GraniteShares 15x Long is currently generating about 0.11 per unit of risk. If you would invest  7,851  in MicroSectors FANG Index on December 4, 2024 and sell it today you would earn a total of  44,499  from holding MicroSectors FANG Index or generate 566.79% return on investment over 90 days.

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

MicroSectors FANG Index  vs.  GraniteShares 15x Long

MicroSectors FANG Index

Risk-Adjusted Performance

Weak

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

GraniteShares 15x Long

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 15x Long are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, GraniteShares 15x disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors FANG and GraniteShares 15x

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

The idea behind MicroSectors FANG Index and GraniteShares 15x Long 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.