Correlation Between Simplify Equity and Vanguard Total

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

Diversification Opportunities for Simplify Equity and Vanguard Total

0.94

Correlation Coefficient

Simplify Equity  Vanguard Total

Almost no diversification

The 3 months correlation between Simplify and Vanguard is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Vanguard Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Stock 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 Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Stock has no effect on the direction of Simplify Equity i.e., Simplify Equity and Vanguard Total go up and down completely randomly.

Pair Corralation between Simplify Equity and Vanguard Total

Considering the 90-day investment horizon Simplify Equity PLUS is expected to under-perform the Vanguard Total. In addition to that, Simplify Equity is 1.19 times more volatile than Vanguard Total Stock. It trades about -0.07 of its total potential returns per unit of risk. Vanguard Total Stock is currently generating about -0.04 per unit of volatility. If you would invest  29,947  in Vanguard Total Stock on December 1, 2024 and sell it today you would lose (651.00) from holding Vanguard Total Stock or give up 2.17% of portfolio value over 90 days.

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

Simplify Equity PLUS  vs.  Vanguard Total Stock

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 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.

Vanguard Total Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Total Stock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Simplify Equity and Vanguard Total

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

The idea behind Simplify Equity PLUS and Vanguard Total Stock 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.