Correlation Between Simplify Equity and Simplify Exchange

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

Diversification Opportunities for Simplify Equity and Simplify Exchange

-0.58

Correlation Coefficient

Simplify Equity  Simplify Exchange

Excellent diversification

The 3 months correlation between Simplify and Simplify is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded 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 Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of Simplify Equity i.e., Simplify Equity and Simplify Exchange go up and down completely randomly.

Pair Corralation between Simplify Equity and Simplify Exchange

Considering the 90-day investment horizon Simplify Equity PLUS is expected to generate 0.95 times more return on investment than Simplify Exchange. However, Simplify Equity PLUS is 1.06 times less risky than Simplify Exchange. It trades about -0.09 of its potential returns per unit of risk. Simplify Exchange Traded is currently generating about -0.13 per unit of risk. If you would invest  3,417  in Simplify Equity PLUS on September 21, 2024 and sell it today you would lose (66.00) from holding Simplify Equity PLUS or give up 1.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Simplify Equity PLUS  vs.  Simplify Exchange Traded

Simplify Equity PLUS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 1 (%) 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Simplify Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Simplify Equity and Simplify Exchange

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

The idea behind Simplify Equity PLUS and Simplify Exchange Traded 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.