Correlation Between Quadratic Deflation and Simplify Exchange

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

By analyzing existing cross correlation between Quadratic Deflation ETF and Simplify Exchange Traded, you can compare the effects of market volatilities on Quadratic Deflation and Simplify Exchange 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 Quadratic Deflation with a short position of Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quadratic Deflation and Simplify Exchange.

Diversification Opportunities for Quadratic Deflation and Simplify Exchange

0.04

Correlation Coefficient

Quadratic Deflation  Simplify Exchange

Significant diversification

The 3 months correlation between Quadratic and Simplify is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Quadratic Deflation ETF and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded and Quadratic Deflation 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 Quadratic Deflation ETF are associated (or correlated) with Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of Quadratic Deflation i.e., Quadratic Deflation and Simplify Exchange go up and down completely randomly.

Pair Corralation between Quadratic Deflation and Simplify Exchange

Given the investment horizon of 90 days Quadratic Deflation ETF is expected to generate 0.68 times more return on investment than Simplify Exchange. However, Quadratic Deflation ETF is 1.46 times less risky than Simplify Exchange. It trades about -0.02 of its potential returns per unit of risk. Simplify Exchange Traded is currently generating about -0.02 per unit of risk. If you would invest  1,354  in Quadratic Deflation ETF on December 23, 2024 and sell it today you would lose (14.00) from holding Quadratic Deflation ETF or give up 1.03% of portfolio value over 90 days.

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

Quadratic Deflation ETF  vs.  Simplify Exchange Traded

Quadratic Deflation ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quadratic Deflation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Quadratic Deflation is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Simplify Exchange Traded

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Quadratic Deflation and Simplify Exchange

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

The idea behind Quadratic Deflation ETF and Simplify Exchange Traded 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.