Correlation Between Simplify Interest and IM Global

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

By analyzing existing cross correlation between Simplify Interest Rate and IM Global Partner, you can compare the effects of market volatilities on Simplify Interest and IM Global 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 Interest with a short position of IM Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Interest and IM Global.

Diversification Opportunities for Simplify Interest and IM Global

0.33

Correlation Coefficient

Simplify Interest  IM Global

Weak diversification

The 3 months correlation between Simplify and DBEH is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Interest Rate and IM Global Partner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IM Global Partner and Simplify Interest 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 Interest Rate are associated (or correlated) with IM Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IM Global Partner has no effect on the direction of Simplify Interest i.e., Simplify Interest and IM Global go up and down completely randomly.

Pair Corralation between Simplify Interest and IM Global

Given the investment horizon of 90 days Simplify Interest Rate is expected to generate 4.54 times more return on investment than IM Global. However, Simplify Interest is 4.54 times more volatile than IM Global Partner. It trades about 0.04 of its potential returns per unit of risk. IM Global Partner is currently generating about 0.06 per unit of risk. If you would invest  4,629  in Simplify Interest Rate on October 22, 2024 and sell it today you would earn a total of  745.00  from holding Simplify Interest Rate or generate 16.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.16%
Values	Daily Returns

Simplify Interest Rate  vs.  IM Global Partner

Simplify Interest Rate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Interest Rate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Simplify Interest may actually be approaching a critical reversion point that can send shares even higher in February 2025.

IM Global Partner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IM Global Partner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, IM Global is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Simplify Interest and IM Global

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

The idea behind Simplify Interest Rate and IM Global Partner 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.