Correlation Between Sprott Focus and Simplify Volatility

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

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

Diversification Opportunities for Sprott Focus and Simplify Volatility

0.71

Correlation Coefficient

Sprott Focus  Simplify Volatility

Poor diversification

The 3 months correlation between Sprott and Simplify is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Simplify Volatility Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Volatility and Sprott Focus 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 Sprott Focus Trust are associated (or correlated) with Simplify Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Volatility has no effect on the direction of Sprott Focus i.e., Sprott Focus and Simplify Volatility go up and down completely randomly.

Pair Corralation between Sprott Focus and Simplify Volatility

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.57 times more return on investment than Simplify Volatility. However, Sprott Focus Trust is 1.77 times less risky than Simplify Volatility. It trades about 0.07 of its potential returns per unit of risk. Simplify Volatility Premium is currently generating about -0.11 per unit of risk. If you would invest  712.00  in Sprott Focus Trust on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Sprott Focus Trust or generate 3.37% return on investment over 90 days.

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

Sprott Focus Trust  vs.  Simplify Volatility Premium

Sprott Focus Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Simplify Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Volatility Premium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Sprott Focus and Simplify Volatility

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

The idea behind Sprott Focus Trust and Simplify Volatility Premium 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.