Correlation Between Simplify Exchange and Alpha Architect

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

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

Diversification Opportunities for Simplify Exchange and Alpha Architect

-0.26

Correlation Coefficient

Simplify Exchange  Alpha Architect

Very good diversification

The 3 months correlation between Simplify and Alpha is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and Alpha Architect High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect High and Simplify Exchange 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 Exchange Traded are associated (or correlated) with Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect High has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and Alpha Architect go up and down completely randomly.

Pair Corralation between Simplify Exchange and Alpha Architect

Given the investment horizon of 90 days Simplify Exchange Traded is expected to under-perform the Alpha Architect. In addition to that, Simplify Exchange is 2.63 times more volatile than Alpha Architect High. It trades about -0.09 of its total potential returns per unit of risk. Alpha Architect High is currently generating about 0.14 per unit of volatility. If you would invest  2,222  in Alpha Architect High on December 29, 2024 and sell it today you would earn a total of  46.00  from holding Alpha Architect High or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Simplify Exchange Traded  vs.  Alpha Architect High

Simplify Exchange Traded

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Simplify Exchange is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Alpha Architect High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Architect High are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Alpha Architect is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Simplify Exchange and Alpha Architect

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

The idea behind Simplify Exchange Traded and Alpha Architect High 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.