Correlation Between Stone Ridge and Simplify Volatility

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

By analyzing existing cross correlation between Stone Ridge 2049 and Simplify Volatility Premium, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Simplify Volatility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Simplify Volatility.

Diversification Opportunities for Stone Ridge and Simplify Volatility

-0.4

Correlation Coefficient

Stone Ridge  Simplify Volatility

Very good diversification

The 3 months correlation between Stone and Simplify is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge 2049 and Simplify Volatility Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Volatility and Stone Ridge 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 Stone Ridge 2049 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 Stone Ridge i.e., Stone Ridge and Simplify Volatility go up and down completely randomly.

Pair Corralation between Stone Ridge and Simplify Volatility

Given the investment horizon of 90 days Stone Ridge 2049 is expected to generate 0.3 times more return on investment than Simplify Volatility. However, Stone Ridge 2049 is 3.36 times less risky than Simplify Volatility. It trades about 0.1 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  16,144  in Stone Ridge 2049 on December 29, 2024 and sell it today you would earn a total of  469.00  from holding Stone Ridge 2049 or generate 2.91% return on investment over 90 days.

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

Stone Ridge 2049  vs.  Simplify Volatility Premium

Stone Ridge 2049

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge 2049 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Stone Ridge is not utilizing all of its potentials. The current 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 Stone Ridge and Simplify Volatility

The main advantage of trading using opposite Stone Ridge and Simplify Volatility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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 Stone Ridge 2049 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.