Correlation Between GraniteShares and SP 500

Can any of the company-specific risk be diversified away by investing in both GraniteShares and SP 500 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 SP 500 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 SP 500 VIX, you can compare the effects of market volatilities on GraniteShares and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares and SP 500.

Diversification Opportunities for GraniteShares and SP 500

-0.81

Correlation Coefficient

GraniteShares  SP 500

Pay attention - limited upside

The 3 months correlation between GraniteShares and VILX is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Long and SP 500 VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 VIX 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 SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 VIX has no effect on the direction of GraniteShares i.e., GraniteShares and SP 500 go up and down completely randomly.

Pair Corralation between GraniteShares and SP 500

Assuming the 90 days trading horizon GraniteShares is expected to generate 2.4 times less return on investment than SP 500. But when comparing it to its historical volatility, GraniteShares 3x Long is 3.24 times less risky than SP 500. It trades about 0.16 of its potential returns per unit of risk. SP 500 VIX is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  184,299  in SP 500 VIX on September 24, 2024 and sell it today you would earn a total of  34,650  from holding SP 500 VIX or generate 18.8% return on investment over 90 days.

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

GraniteShares 3x Long  vs.  SP 500 VIX

GraniteShares 3x Long

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GraniteShares 3x Long are ranked lower than 17 (%) 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.

SP 500 VIX

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 VIX are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SP 500 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GraniteShares and SP 500

The main advantage of trading using opposite GraniteShares and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GraniteShares position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.

The idea behind GraniteShares 3x Long and SP 500 VIX 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.