Correlation Between First Trust and Simplify Exchange

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

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

Diversification Opportunities for First Trust and Simplify Exchange

-0.53

Correlation Coefficient

First Trust  Simplify Exchange

Excellent diversification

The 3 months correlation between First and Simplify is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed 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 First Trust 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 First Trust Managed 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 First Trust i.e., First Trust and Simplify Exchange go up and down completely randomly.

Pair Corralation between First Trust and Simplify Exchange

Considering the 90-day investment horizon First Trust Managed is expected to under-perform the Simplify Exchange. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Managed is 1.44 times less risky than Simplify Exchange. The etf trades about -0.1 of its potential returns per unit of risk. The Simplify Exchange Traded is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,737  in Simplify Exchange Traded on December 27, 2024 and sell it today you would earn a total of  188.00  from holding Simplify Exchange Traded or generate 6.87% return on investment over 90 days.

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

First Trust Managed  vs.  Simplify Exchange Traded

First Trust Managed

Risk-Adjusted Performance

Very Weak

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

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 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Simplify Exchange may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Trust and Simplify Exchange

The main advantage of trading using opposite First Trust and Simplify Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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 First Trust Managed 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.