Correlation Between SoFi Next and Simplify Exchange

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

By analyzing existing cross correlation between SoFi Next 500 and Simplify Exchange Traded, you can compare the effects of market volatilities on SoFi Next and Simplify Exchange 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 SoFi Next with a short position of Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoFi Next and Simplify Exchange.

Diversification Opportunities for SoFi Next and Simplify Exchange

0.23

Correlation Coefficient

SoFi Next  Simplify Exchange

Modest diversification

The 3 months correlation between SoFi and Simplify is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Next 500 and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded and SoFi Next 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 SoFi Next 500 are associated (or correlated) with Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of SoFi Next i.e., SoFi Next and Simplify Exchange go up and down completely randomly.

Pair Corralation between SoFi Next and Simplify Exchange

Given the investment horizon of 90 days SoFi Next 500 is expected to under-perform the Simplify Exchange. But the etf apears to be less risky and, when comparing its historical volatility, SoFi Next 500 is 1.23 times less risky than Simplify Exchange. The etf trades about -0.14 of its potential returns per unit of risk. The Simplify Exchange Traded is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,102  in Simplify Exchange Traded on November 28, 2024 and sell it today you would earn a total of  31.00  from holding Simplify Exchange Traded or generate 1.47% return on investment over 90 days.

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

SoFi Next 500  vs.  Simplify Exchange Traded

SoFi Next 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoFi Next 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Simplify Exchange Traded

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Simplify Exchange is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SoFi Next and Simplify Exchange

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

The idea behind SoFi Next 500 and Simplify Exchange Traded 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.