Correlation Between GraniteShares and WisdomTree Battery

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

By analyzing existing cross correlation between GraniteShares 3x Long and WisdomTree Battery Solutions, you can compare the effects of market volatilities on GraniteShares and WisdomTree Battery 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 with a short position of WisdomTree Battery. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares and WisdomTree Battery.

Diversification Opportunities for GraniteShares and WisdomTree Battery

0.79

Correlation Coefficient

GraniteShares  WisdomTree Battery

Poor diversification

The 3 months correlation between GraniteShares and WisdomTree is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Long and WisdomTree Battery Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Battery and GraniteShares 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 3x Long are associated (or correlated) with WisdomTree Battery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Battery has no effect on the direction of GraniteShares i.e., GraniteShares and WisdomTree Battery go up and down completely randomly.

Pair Corralation between GraniteShares and WisdomTree Battery

Assuming the 90 days trading horizon GraniteShares 3x Long is expected to generate 2.54 times more return on investment than WisdomTree Battery. However, GraniteShares is 2.54 times more volatile than WisdomTree Battery Solutions. It trades about 0.26 of its potential returns per unit of risk. WisdomTree Battery Solutions is currently generating about 0.16 per unit of risk. If you would invest  6,160  in GraniteShares 3x Long on September 4, 2024 and sell it today you would earn a total of  5,264  from holding GraniteShares 3x Long or generate 85.45% return on investment over 90 days.

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

GraniteShares 3x Long  vs.  WisdomTree Battery Solutions

GraniteShares 3x Long

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Long are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GraniteShares unveiled solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Battery

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Battery Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Battery unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GraniteShares and WisdomTree Battery

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

The idea behind GraniteShares 3x Long and WisdomTree Battery Solutions 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.