Correlation Between Simplify Equity and Goldman Sachs

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

Diversification Opportunities for Simplify Equity and Goldman Sachs

-0.04

Correlation Coefficient

Simplify Equity  Goldman Sachs

Good diversification

The 3 months correlation between Simplify and Goldman is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Goldman Sachs ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs ETF has no effect on the direction of Simplify Equity i.e., Simplify Equity and Goldman Sachs go up and down completely randomly.

Pair Corralation between Simplify Equity and Goldman Sachs

Given the investment horizon of 90 days Simplify Equity PLUS is expected to under-perform the Goldman Sachs. In addition to that, Simplify Equity is 6.64 times more volatile than Goldman Sachs ETF. It trades about -0.09 of its total potential returns per unit of risk. Goldman Sachs ETF is currently generating about -0.01 per unit of volatility. If you would invest  4,954  in Goldman Sachs ETF on December 30, 2024 and sell it today you would lose (6.00) from holding Goldman Sachs ETF or give up 0.12% of portfolio value over 90 days.

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

Simplify Equity PLUS  vs.  Goldman Sachs ETF

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.

Goldman Sachs ETF

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goldman Sachs ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Goldman Sachs is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Simplify Equity and Goldman Sachs

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

The idea behind Simplify Equity PLUS and Goldman Sachs 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.