Correlation Between MicroSectors FANG and GraniteShares 175x

Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and GraniteShares 175x 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 175x 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 175x Long, you can compare the effects of market volatilities on MicroSectors FANG and GraniteShares 175x 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 175x. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and GraniteShares 175x.

Diversification Opportunities for MicroSectors FANG and GraniteShares 175x

0.54

Correlation Coefficient

MicroSectors FANG  GraniteShares 175x

Very weak diversification

The 3 months correlation between MicroSectors and GraniteShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and GraniteShares 175x Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 175x 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 175x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 175x Long has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and GraniteShares 175x go up and down completely randomly.

Pair Corralation between MicroSectors FANG and GraniteShares 175x

Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 0.65 times more return on investment than GraniteShares 175x. However, MicroSectors FANG Index is 1.54 times less risky than GraniteShares 175x. It trades about 0.02 of its potential returns per unit of risk. GraniteShares 175x Long is currently generating about -0.07 per unit of risk. If you would invest  52,416  in MicroSectors FANG Index on December 2, 2024 and sell it today you would lose (66.00) from holding MicroSectors FANG Index or give up 0.13% of portfolio value over 90 days.

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

MicroSectors FANG Index  vs.  GraniteShares 175x Long

MicroSectors FANG Index

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors FANG Index are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, MicroSectors FANG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

GraniteShares 175x Long

Risk-Adjusted Performance

Very Weak

Over the last 90 days GraniteShares 175x Long has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's essential indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with MicroSectors FANG and GraniteShares 175x

The main advantage of trading using opposite MicroSectors FANG and GraniteShares 175x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, GraniteShares 175x 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 175x will offset losses from the drop in GraniteShares 175x's long position.

The idea behind MicroSectors FANG Index and GraniteShares 175x 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.