Correlation Between Simplify Equity and Quadratic Deflation

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

Diversification Opportunities for Simplify Equity and Quadratic Deflation

0.17

Correlation Coefficient

Simplify Equity  Quadratic Deflation

Average diversification

The 3 months correlation between Simplify and Quadratic is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Quadratic Deflation ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quadratic Deflation ETF 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 Quadratic Deflation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quadratic Deflation ETF has no effect on the direction of Simplify Equity i.e., Simplify Equity and Quadratic Deflation go up and down completely randomly.

Pair Corralation between Simplify Equity and Quadratic Deflation

Considering the 90-day investment horizon Simplify Equity PLUS is expected to generate 0.95 times more return on investment than Quadratic Deflation. However, Simplify Equity PLUS is 1.05 times less risky than Quadratic Deflation. It trades about 0.04 of its potential returns per unit of risk. Quadratic Deflation ETF is currently generating about -0.09 per unit of risk. If you would invest  3,288  in Simplify Equity PLUS on October 5, 2024 and sell it today you would earn a total of  60.00  from holding Simplify Equity PLUS or generate 1.82% return on investment over 90 days.

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

Simplify Equity PLUS  vs.  Quadratic Deflation ETF

Simplify Equity PLUS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Simplify Equity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Quadratic Deflation ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quadratic Deflation ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Quadratic Deflation is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Simplify Equity and Quadratic Deflation

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

The idea behind Simplify Equity PLUS and Quadratic Deflation ETF 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.