Correlation Between Simplify Equity and VanEck Bitcoin

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

Diversification Opportunities for Simplify Equity and VanEck Bitcoin

0.89

Correlation Coefficient

Simplify Equity  VanEck Bitcoin

Very poor diversification

The 3 months correlation between Simplify and VanEck is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and VanEck Bitcoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Bitcoin Trust 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 VanEck Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Bitcoin Trust has no effect on the direction of Simplify Equity i.e., Simplify Equity and VanEck Bitcoin go up and down completely randomly.

Pair Corralation between Simplify Equity and VanEck Bitcoin

Given the investment horizon of 90 days Simplify Equity PLUS is expected to generate 0.42 times more return on investment than VanEck Bitcoin. However, Simplify Equity PLUS is 2.4 times less risky than VanEck Bitcoin. It trades about -0.09 of its potential returns per unit of risk. VanEck Bitcoin Trust is currently generating about -0.05 per unit of risk. If you would invest  3,879  in Simplify Equity PLUS on December 29, 2024 and sell it today you would lose (256.00) from holding Simplify Equity PLUS or give up 6.6% of portfolio value over 90 days.

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

Simplify Equity PLUS  vs.  VanEck Bitcoin Trust

Simplify Equity PLUS

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Equity PLUS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

VanEck Bitcoin Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Bitcoin Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Pair Trading with Simplify Equity and VanEck Bitcoin

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

The idea behind Simplify Equity PLUS and VanEck Bitcoin 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.