Correlation Between WisdomTree Natural and GraniteShares

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

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

Diversification Opportunities for WisdomTree Natural and GraniteShares

0.08

Correlation Coefficient

WisdomTree Natural  GraniteShares

Significant diversification

The 3 months correlation between WisdomTree and GraniteShares is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Natural Gas and GraniteShares 3x Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 3x Long and WisdomTree Natural 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 WisdomTree Natural Gas are associated (or correlated) with GraniteShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GraniteShares 3x Long has no effect on the direction of WisdomTree Natural i.e., WisdomTree Natural and GraniteShares go up and down completely randomly.

Pair Corralation between WisdomTree Natural and GraniteShares

Assuming the 90 days trading horizon WisdomTree Natural is expected to generate 10.55 times less return on investment than GraniteShares. But when comparing it to its historical volatility, WisdomTree Natural Gas is 1.61 times less risky than GraniteShares. It trades about 0.04 of its potential returns per unit of risk. GraniteShares 3x Long is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,875  in GraniteShares 3x Long on September 15, 2024 and sell it today you would earn a total of  3,436  from holding GraniteShares 3x Long or generate 119.51% return on investment over 90 days.

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

WisdomTree Natural Gas  vs.  GraniteShares 3x Long

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.

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.

Pair Trading with WisdomTree Natural and GraniteShares

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

The idea behind WisdomTree Natural Gas and GraniteShares 3x 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.