Correlation Between GraniteShares and Vanguard Total

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

By analyzing existing cross correlation between GraniteShares 2x Long and Vanguard Total Stock, you can compare the effects of market volatilities on GraniteShares and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of GraniteShares and Vanguard Total.

Diversification Opportunities for GraniteShares and Vanguard Total

0.37

Correlation Coefficient

GraniteShares  Vanguard Total

Weak diversification

The 3 months correlation between GraniteShares and Vanguard is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 2x Long and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 2x Long are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of GraniteShares i.e., GraniteShares and Vanguard Total go up and down completely randomly.

Pair Corralation between GraniteShares and Vanguard Total

Given the investment horizon of 90 days GraniteShares 2x Long is expected to under-perform the Vanguard Total. In addition to that, GraniteShares is 7.05 times more volatile than Vanguard Total Stock. It trades about -0.06 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about 0.08 per unit of volatility. If you would invest  25,321  in Vanguard Total Stock on June 15, 2024 and sell it today you would earn a total of  2,209  from holding Vanguard Total Stock or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

GraniteShares 2x Long  vs.  Vanguard Total Stock

GraniteShares 2x Long

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GraniteShares 2x Long has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, GraniteShares is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Vanguard Total Stock

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with GraniteShares and Vanguard Total

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

The idea behind GraniteShares 2x Long and Vanguard Total Stock 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.