Correlation Between Simplify Equity and Invesco SP

Can any of the company-specific risk be diversified away by investing in both Simplify Equity and Invesco SP 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 Invesco SP 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 Invesco SP 500, you can compare the effects of market volatilities on Simplify Equity and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Equity and Invesco SP.

Diversification Opportunities for Simplify Equity and Invesco SP

0.82

Correlation Coefficient

Simplify Equity  Invesco SP

Very poor diversification

The 3 months correlation between Simplify and Invesco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Simplify Equity i.e., Simplify Equity and Invesco SP go up and down completely randomly.

Pair Corralation between Simplify Equity and Invesco SP

Considering the 90-day investment horizon Simplify Equity PLUS is expected to under-perform the Invesco SP. In addition to that, Simplify Equity is 1.96 times more volatile than Invesco SP 500. It trades about -0.12 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about -0.13 per unit of volatility. If you would invest  3,787  in Invesco SP 500 on December 22, 2024 and sell it today you would lose (158.00) from holding Invesco SP 500 or give up 4.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Simplify Equity PLUS  vs.  Invesco SP 500

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 unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Invesco SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Invesco SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Simplify Equity and Invesco SP

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

The idea behind Simplify Equity PLUS and Invesco SP 500 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.