Correlation Between Simplify Propel and Health Care

Can any of the company-specific risk be diversified away by investing in both Simplify Propel and Health Care 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 Propel and Health Care into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Simplify Propel Opportunities and Health Care Select, you can compare the effects of market volatilities on Simplify Propel and Health Care 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 Propel with a short position of Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Propel and Health Care.

Diversification Opportunities for Simplify Propel and Health Care

0.79

Correlation Coefficient

Simplify Propel  Health Care

Poor diversification

The 3 months correlation between Simplify and Health is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Propel Opportunities and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select and Simplify Propel 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 Propel Opportunities are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of Simplify Propel i.e., Simplify Propel and Health Care go up and down completely randomly.

Pair Corralation between Simplify Propel and Health Care

Given the investment horizon of 90 days Simplify Propel Opportunities is expected to under-perform the Health Care. In addition to that, Simplify Propel is 2.12 times more volatile than Health Care Select. It trades about -0.22 of its total potential returns per unit of risk. Health Care Select is currently generating about -0.19 per unit of volatility. If you would invest  14,405  in Health Care Select on October 10, 2024 and sell it today you would lose (434.00) from holding Health Care Select or give up 3.01% of portfolio value over 90 days.

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

Simplify Propel Opportunities  vs.  Health Care Select

Simplify Propel Oppo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Propel Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

Health Care Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Simplify Propel and Health Care

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

The idea behind Simplify Propel Opportunities and Health Care Select 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.