Correlation Between GraniteShares FAANG and Leverage Shares
Can any of the company-specific risk be diversified away by investing in both GraniteShares FAANG and Leverage Shares 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 FAANG and Leverage Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GraniteShares FAANG ETC and Leverage Shares 5x, you can compare the effects of market volatilities on GraniteShares FAANG and Leverage Shares 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 FAANG with a short position of Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares FAANG and Leverage Shares.
Diversification Opportunities for GraniteShares FAANG and Leverage Shares
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GraniteShares and Leverage is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares FAANG ETC and Leverage Shares 5x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 5x and GraniteShares FAANG 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 FAANG ETC are associated (or correlated) with Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 5x has no effect on the direction of GraniteShares FAANG i.e., GraniteShares FAANG and Leverage Shares go up and down completely randomly.
Pair Corralation between GraniteShares FAANG and Leverage Shares
Assuming the 90 days trading horizon GraniteShares FAANG is expected to generate 2.61 times less return on investment than Leverage Shares. But when comparing it to its historical volatility, GraniteShares FAANG ETC is 3.88 times less risky than Leverage Shares. It trades about 0.13 of its potential returns per unit of risk. Leverage Shares 5x is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,675 in Leverage Shares 5x on August 24, 2024 and sell it today you would earn a total of 10,660 from holding Leverage Shares 5x or generate 398.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
GraniteShares FAANG ETC vs. Leverage Shares 5x
Performance |
| Timeline |
| GraniteShares FAANG ETC |
| Leverage Shares 5x |
GraniteShares FAANG and Leverage Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GraniteShares FAANG and Leverage Shares
The main advantage of trading using opposite GraniteShares FAANG and Leverage Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GraniteShares FAANG position performs unexpectedly, Leverage Shares 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 Leverage Shares will offset losses from the drop in Leverage Shares' long position.| GraniteShares FAANG vs. GraniteShares 3x Short | GraniteShares FAANG vs. GraniteShares 3x Long | GraniteShares FAANG vs. GraniteShares 3x Long | GraniteShares FAANG vs. GraniteShares 1x Short |
| Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x | Leverage Shares vs. Leverage Shares 3x |
Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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