Correlation Between SP 500 and GraniteShares

Can any of the company-specific risk be diversified away by investing in both SP 500 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 SP 500 and GraniteShares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SP 500 VIX and GraniteShares 3x Short, you can compare the effects of market volatilities on SP 500 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 SP 500 with a short position of GraniteShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP 500 and GraniteShares.

Diversification Opportunities for SP 500 and GraniteShares

0.52

Correlation Coefficient

SP 500  GraniteShares

Very weak diversification

The 3 months correlation between VILX and GraniteShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding SP 500 VIX and GraniteShares 3x Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GraniteShares 3x Short and SP 500 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 SP 500 VIX 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 Short has no effect on the direction of SP 500 i.e., SP 500 and GraniteShares go up and down completely randomly.

Pair Corralation between SP 500 and GraniteShares

Assuming the 90 days trading horizon SP 500 VIX is expected to generate 2.26 times more return on investment than GraniteShares. However, SP 500 is 2.26 times more volatile than GraniteShares 3x Short. It trades about 0.03 of its potential returns per unit of risk. GraniteShares 3x Short is currently generating about 0.0 per unit of risk. If you would invest  226,737  in SP 500 VIX on September 24, 2024 and sell it today you would lose (7,788) from holding SP 500 VIX or give up 3.43% of portfolio value over 90 days.

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

SP 500 VIX  vs.  GraniteShares 3x Short

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.

GraniteShares 3x Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GraniteShares 3x Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GraniteShares is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SP 500 and GraniteShares

The main advantage of trading using opposite SP 500 and GraniteShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP 500 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 SP 500 VIX and GraniteShares 3x Short 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.