Correlation Between Vanguard Real and Simplify Equity

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

By analyzing existing cross correlation between Vanguard Real Estate and Simplify Equity PLUS, you can compare the effects of market volatilities on Vanguard Real and Simplify Equity 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 Vanguard Real with a short position of Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Real and Simplify Equity.

Diversification Opportunities for Vanguard Real and Simplify Equity

-0.13

Correlation Coefficient

Vanguard Real  Simplify Equity

Good diversification

The 3 months correlation between Vanguard and Simplify is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Real Estate and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS and Vanguard Real 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 Vanguard Real Estate are associated (or correlated) with Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Vanguard Real i.e., Vanguard Real and Simplify Equity go up and down completely randomly.

Pair Corralation between Vanguard Real and Simplify Equity

Considering the 90-day investment horizon Vanguard Real Estate is expected to generate 1.24 times more return on investment than Simplify Equity. However, Vanguard Real is 1.24 times more volatile than Simplify Equity PLUS. It trades about 0.13 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.1 per unit of risk. If you would invest  8,228  in Vanguard Real Estate on September 12, 2024 and sell it today you would earn a total of  1,198  from holding Vanguard Real Estate or generate 14.56% return on investment over 90 days.

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

Vanguard Real Estate  vs.  Simplify Equity PLUS

Vanguard Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Vanguard Real is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Simplify Equity PLUS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Simplify Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Real and Simplify Equity

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

The idea behind Vanguard Real Estate and Simplify Equity PLUS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.