Correlation Between SPDR Galaxy and Simplify Equity

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

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

Diversification Opportunities for SPDR Galaxy and Simplify Equity

0.92

Correlation Coefficient

SPDR Galaxy  Simplify Equity

Almost no diversification

The 3 months correlation between SPDR and Simplify is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Galaxy Digital and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS and SPDR Galaxy 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 SPDR Galaxy Digital are associated (or correlated) with Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of SPDR Galaxy i.e., SPDR Galaxy and Simplify Equity go up and down completely randomly.

Pair Corralation between SPDR Galaxy and Simplify Equity

Given the investment horizon of 90 days SPDR Galaxy Digital is expected to under-perform the Simplify Equity. In addition to that, SPDR Galaxy is 3.19 times more volatile than Simplify Equity PLUS. It trades about -0.07 of its total potential returns per unit of risk. Simplify Equity PLUS is currently generating about -0.06 per unit of volatility. If you would invest  3,968  in Simplify Equity PLUS on December 25, 2024 and sell it today you would lose (197.00) from holding Simplify Equity PLUS or give up 4.96% of portfolio value over 90 days.

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

SPDR Galaxy Digital  vs.  Simplify Equity PLUS

SPDR Galaxy Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Galaxy Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Simplify Equity PLUS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SPDR Galaxy and Simplify Equity

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

The idea behind SPDR Galaxy Digital and Simplify Equity PLUS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.