Correlation Between GraniteShares and PowerShares Preferred

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

Diversification Opportunities for GraniteShares and PowerShares Preferred

0.2
  Correlation Coefficient

Modest diversification

The 3 months correlation between GraniteShares and PowerShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding GraniteShares 3x Long and PowerShares Preferred Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PowerShares Preferred 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 PowerShares Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PowerShares Preferred has no effect on the direction of GraniteShares i.e., GraniteShares and PowerShares Preferred go up and down completely randomly.

Pair Corralation between GraniteShares and PowerShares Preferred

Assuming the 90 days trading horizon GraniteShares 3x Long is expected to generate 13.29 times more return on investment than PowerShares Preferred. However, GraniteShares is 13.29 times more volatile than PowerShares Preferred Shares. It trades about 0.22 of its potential returns per unit of risk. PowerShares Preferred Shares is currently generating about 0.03 per unit of risk. If you would invest  2,470,000  in GraniteShares 3x Long on April 23, 2025 and sell it today you would earn a total of  3,860,000  from holding GraniteShares 3x Long or generate 156.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

GraniteShares 3x Long  vs.  PowerShares Preferred Shares

 Performance 
       Timeline  
GraniteShares 3x Long 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
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 unsteady basic indicators, GraniteShares unveiled solid returns over the last few months and may actually be approaching a breakup point.
PowerShares Preferred 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in PowerShares Preferred Shares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, PowerShares Preferred is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

GraniteShares and PowerShares Preferred Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GraniteShares and PowerShares Preferred

The main advantage of trading using opposite GraniteShares and PowerShares Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GraniteShares position performs unexpectedly, PowerShares Preferred 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 PowerShares Preferred will offset losses from the drop in PowerShares Preferred's long position.
The idea behind GraniteShares 3x Long and PowerShares Preferred Shares 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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