Correlation Between Simplify Bitcoin and ProShares Trust

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

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

Diversification Opportunities for Simplify Bitcoin and ProShares Trust

0.96

Correlation Coefficient

Simplify Bitcoin  ProShares Trust

Almost no diversification

The 3 months correlation between Simplify and ProShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Bitcoin Strategy and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust and Simplify Bitcoin 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 Bitcoin Strategy are associated (or correlated) with ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Simplify Bitcoin i.e., Simplify Bitcoin and ProShares Trust go up and down completely randomly.

Pair Corralation between Simplify Bitcoin and ProShares Trust

Given the investment horizon of 90 days Simplify Bitcoin Strategy is expected to generate 0.83 times more return on investment than ProShares Trust. However, Simplify Bitcoin Strategy is 1.21 times less risky than ProShares Trust. It trades about 0.27 of its potential returns per unit of risk. ProShares Trust is currently generating about 0.21 per unit of risk. If you would invest  1,803  in Simplify Bitcoin Strategy on September 16, 2024 and sell it today you would earn a total of  1,425  from holding Simplify Bitcoin Strategy or generate 79.03% return on investment over 90 days.

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

Simplify Bitcoin Strategy  vs.  ProShares Trust

Simplify Bitcoin Strategy

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Bitcoin Strategy are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Simplify Bitcoin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

ProShares Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, ProShares Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplify Bitcoin and ProShares Trust

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

The idea behind Simplify Bitcoin Strategy and ProShares Trust 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.