Correlation Between Simplify Equity and SPDR Galaxy

Can any of the company-specific risk be diversified away by investing in both Simplify Equity and SPDR Galaxy 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 SPDR Galaxy 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 SPDR Galaxy Digital, you can compare the effects of market volatilities on Simplify Equity and SPDR Galaxy 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 SPDR Galaxy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Equity and SPDR Galaxy.

Diversification Opportunities for Simplify Equity and SPDR Galaxy

0.81

Correlation Coefficient

Simplify Equity  SPDR Galaxy

Very poor diversification

The 3 months correlation between Simplify and SPDR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and SPDR Galaxy Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Digital 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Digital has no effect on the direction of Simplify Equity i.e., Simplify Equity and SPDR Galaxy go up and down completely randomly.

Pair Corralation between Simplify Equity and SPDR Galaxy

Given the investment horizon of 90 days Simplify Equity is expected to generate 3.53 times less return on investment than SPDR Galaxy. But when comparing it to its historical volatility, Simplify Equity PLUS is 3.39 times less risky than SPDR Galaxy. It trades about 0.13 of its potential returns per unit of risk. SPDR Galaxy Digital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,490  in SPDR Galaxy Digital on October 10, 2024 and sell it today you would earn a total of  1,082  from holding SPDR Galaxy Digital or generate 43.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	16.94%
Values	Daily Returns

Simplify Equity PLUS  vs.  SPDR Galaxy Digital

Simplify Equity PLUS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Simplify Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPDR Galaxy Digital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Galaxy Digital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, SPDR Galaxy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplify Equity and SPDR Galaxy

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

The idea behind Simplify Equity PLUS and SPDR Galaxy Digital 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.