Correlation Between Simplify Equity and Grayscale Bitcoin

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

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

Diversification Opportunities for Simplify Equity and Grayscale Bitcoin

0.97

Correlation Coefficient

Simplify Equity  Grayscale Bitcoin

Almost no diversification

The 3 months correlation between Simplify and Grayscale is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Grayscale Bitcoin Mini in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Bitcoin Mini and Simplify Equity 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 Equity PLUS are associated (or correlated) with Grayscale Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Bitcoin Mini has no effect on the direction of Simplify Equity i.e., Simplify Equity and Grayscale Bitcoin go up and down completely randomly.

Pair Corralation between Simplify Equity and Grayscale Bitcoin

Given the investment horizon of 90 days Simplify Equity PLUS is expected to generate 0.33 times more return on investment than Grayscale Bitcoin. However, Simplify Equity PLUS is 3.04 times less risky than Grayscale Bitcoin. It trades about -0.03 of its potential returns per unit of risk. Grayscale Bitcoin Mini is currently generating about -0.01 per unit of risk. If you would invest  3,957  in Simplify Equity PLUS on September 22, 2024 and sell it today you would lose (33.00) from holding Simplify Equity PLUS or give up 0.83% of portfolio value over 90 days.

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

Simplify Equity PLUS  vs.  Grayscale Bitcoin Mini

Simplify Equity PLUS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Simplify Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grayscale Bitcoin Mini

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Mini are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplify Equity and Grayscale Bitcoin

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

The idea behind Simplify Equity PLUS and Grayscale Bitcoin Mini 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.