Correlation Between GraniteShares and WisdomTree Natural

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

Diversification Opportunities for GraniteShares and WisdomTree Natural

-0.16

Correlation Coefficient

GraniteShares  WisdomTree Natural

Good diversification

The 3 months correlation between GraniteShares and WisdomTree is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Long and WisdomTree Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Natural Gas 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 Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Natural Gas has no effect on the direction of GraniteShares i.e., GraniteShares and WisdomTree Natural go up and down completely randomly.

Pair Corralation between GraniteShares and WisdomTree Natural

Assuming the 90 days trading horizon GraniteShares 3x Long is expected to generate 1.52 times more return on investment than WisdomTree Natural. However, GraniteShares is 1.52 times more volatile than WisdomTree Natural Gas. It trades about 0.19 of its potential returns per unit of risk. WisdomTree Natural Gas is currently generating about 0.04 per unit of risk. If you would invest  637,050  in GraniteShares 3x Long on September 14, 2024 and sell it today you would earn a total of  427,150  from holding GraniteShares 3x Long or generate 67.05% return on investment over 90 days.

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

GraniteShares 3x Long  vs.  WisdomTree Natural Gas

GraniteShares 3x Long

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Long are ranked lower than 14 (%) 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 Natural Gas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Natural Gas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree Natural may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GraniteShares and WisdomTree Natural

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

The idea behind GraniteShares 3x Long and WisdomTree Natural Gas 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.