Correlation Between Simplify Exchange and PGIM Active

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

By analyzing existing cross correlation between Simplify Exchange Traded and PGIM Active High, you can compare the effects of market volatilities on Simplify Exchange and PGIM Active 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 Exchange with a short position of PGIM Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Exchange and PGIM Active.

Diversification Opportunities for Simplify Exchange and PGIM Active

0.36

Correlation Coefficient

Simplify Exchange  PGIM Active

Weak diversification

The 3 months correlation between Simplify and PGIM is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and PGIM Active High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Active High and Simplify Exchange 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 Exchange Traded are associated (or correlated) with PGIM Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Active High has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and PGIM Active go up and down completely randomly.

Pair Corralation between Simplify Exchange and PGIM Active

Considering the 90-day investment horizon Simplify Exchange Traded is expected to generate 2.23 times more return on investment than PGIM Active. However, Simplify Exchange is 2.23 times more volatile than PGIM Active High. It trades about 0.39 of its potential returns per unit of risk. PGIM Active High is currently generating about 0.28 per unit of risk. If you would invest  2,118  in Simplify Exchange Traded on December 5, 2024 and sell it today you would earn a total of  73.00  from holding Simplify Exchange Traded or generate 3.45% return on investment over 90 days.

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

Simplify Exchange Traded  vs.  PGIM Active High

Simplify Exchange Traded

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Simplify Exchange is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PGIM Active High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PGIM Active High are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, PGIM Active is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Simplify Exchange and PGIM Active

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

The idea behind Simplify Exchange Traded and PGIM Active High 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.