Correlation Between Simplify Exchange and MFUT

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

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

Diversification Opportunities for Simplify Exchange and MFUT

-0.46

Correlation Coefficient

Simplify Exchange  MFUT

Very good diversification

The 3 months correlation between Simplify and MFUT is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and MFUT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFUT and Simplify Exchange 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 Simplify Exchange Traded are associated (or correlated) with MFUT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFUT has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and MFUT go up and down completely randomly.

Pair Corralation between Simplify Exchange and MFUT

Considering the 90-day investment horizon Simplify Exchange Traded is expected to generate 1.18 times more return on investment than MFUT. However, Simplify Exchange is 1.18 times more volatile than MFUT. It trades about 0.12 of its potential returns per unit of risk. MFUT is currently generating about -0.14 per unit of risk. If you would invest  2,766  in Simplify Exchange Traded on December 28, 2024 and sell it today you would earn a total of  159.00  from holding Simplify Exchange Traded or generate 5.75% return on investment over 90 days.

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

Simplify Exchange Traded  vs.  MFUT

Simplify Exchange Traded

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Simplify Exchange is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

MFUT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Simplify Exchange and MFUT

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

The idea behind Simplify Exchange Traded and MFUT 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.