Correlation Between Simplify Macro and SPDR SSgA

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

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

Diversification Opportunities for Simplify Macro and SPDR SSgA

0.61

Correlation Coefficient

Simplify Macro  SPDR SSgA

Poor diversification

The 3 months correlation between Simplify and SPDR is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Macro Strategy and SPDR SSgA Multi Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Multi and Simplify Macro 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 Macro Strategy are associated (or correlated) with SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Multi has no effect on the direction of Simplify Macro i.e., Simplify Macro and SPDR SSgA go up and down completely randomly.

Pair Corralation between Simplify Macro and SPDR SSgA

Considering the 90-day investment horizon Simplify Macro Strategy is expected to under-perform the SPDR SSgA. In addition to that, Simplify Macro is 1.33 times more volatile than SPDR SSgA Multi Asset. It trades about -0.07 of its total potential returns per unit of risk. SPDR SSgA Multi Asset is currently generating about -0.02 per unit of volatility. If you would invest  2,812  in SPDR SSgA Multi Asset on December 2, 2024 and sell it today you would lose (18.00) from holding SPDR SSgA Multi Asset or give up 0.64% of portfolio value over 90 days.

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

Simplify Macro Strategy  vs.  SPDR SSgA Multi Asset

Simplify Macro Strategy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Macro Strategy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Simplify Macro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

SPDR SSgA Multi

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SSgA Multi Asset has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, SPDR SSgA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simplify Macro and SPDR SSgA

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

The idea behind Simplify Macro Strategy and SPDR SSgA Multi Asset 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.