Correlation Between ProShares Hedge and Simplify Macro

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

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

Diversification Opportunities for ProShares Hedge and Simplify Macro

0.6

Correlation Coefficient

ProShares Hedge  Simplify Macro

Poor diversification

The 3 months correlation between ProShares and Simplify is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Hedge Replication and Simplify Macro Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Macro Strategy and ProShares Hedge 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 ProShares Hedge Replication are associated (or correlated) with Simplify Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Macro Strategy has no effect on the direction of ProShares Hedge i.e., ProShares Hedge and Simplify Macro go up and down completely randomly.

Pair Corralation between ProShares Hedge and Simplify Macro

Considering the 90-day investment horizon ProShares Hedge is expected to generate 1.66 times less return on investment than Simplify Macro. But when comparing it to its historical volatility, ProShares Hedge Replication is 2.17 times less risky than Simplify Macro. It trades about 0.11 of its potential returns per unit of risk. Simplify Macro Strategy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,142  in Simplify Macro Strategy on September 12, 2024 and sell it today you would earn a total of  88.00  from holding Simplify Macro Strategy or generate 4.11% return on investment over 90 days.

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

ProShares Hedge Replication  vs.  Simplify Macro Strategy

ProShares Hedge Repl

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Hedge Replication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Simplify Macro Strategy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Macro Strategy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with ProShares Hedge and Simplify Macro

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

The idea behind ProShares Hedge Replication and Simplify Macro Strategy 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.