Correlation Between Simplify Exchange and Simplify Volatility

Can any of the company-specific risk be diversified away by investing in both Simplify Exchange 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 Simplify Exchange and Simplify Volatility 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 Simplify Volatility Premium, you can compare the effects of market volatilities on Simplify Exchange 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 Simplify Exchange with a short position of Simplify Volatility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Exchange and Simplify Volatility.

Diversification Opportunities for Simplify Exchange and Simplify Volatility

0.65

Correlation Coefficient

Simplify Exchange  Simplify Volatility

Poor diversification

The 3 months correlation between Simplify and Simplify is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and Simplify Volatility Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Volatility 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 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 Simplify Exchange i.e., Simplify Exchange and Simplify Volatility go up and down completely randomly.

Pair Corralation between Simplify Exchange and Simplify Volatility

Given the investment horizon of 90 days Simplify Exchange Traded is expected to generate 0.5 times more return on investment than Simplify Volatility. However, Simplify Exchange Traded is 2.01 times less risky than Simplify Volatility. It trades about -0.32 of its potential returns per unit of risk. Simplify Volatility Premium is currently generating about -0.16 per unit of risk. If you would invest  2,312  in Simplify Exchange Traded on December 3, 2024 and sell it today you would lose (88.00) from holding Simplify Exchange Traded or give up 3.81% of portfolio value over 90 days.

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

Simplify Exchange Traded  vs.  Simplify Volatility Premium

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. Despite fairly strong technical and fundamental indicators, Simplify Exchange is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 quite persistent basic indicators, Simplify Volatility is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Simplify Exchange and Simplify Volatility

The main advantage of trading using opposite Simplify Exchange and Simplify Volatility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Exchange 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 Simplify Exchange Traded 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.