Correlation Between SPDR SP and Simplify Propel

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

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

Diversification Opportunities for SPDR SP and Simplify Propel

0.78

Correlation Coefficient

SPDR SP  Simplify Propel

Poor diversification

The 3 months correlation between SPDR and Simplify is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Biotech and Simplify Propel Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Propel Oppo and SPDR SP 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 SPDR SP Biotech are associated (or correlated) with Simplify Propel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Propel Oppo has no effect on the direction of SPDR SP i.e., SPDR SP and Simplify Propel go up and down completely randomly.

Pair Corralation between SPDR SP and Simplify Propel

Considering the 90-day investment horizon SPDR SP Biotech is expected to generate 0.5 times more return on investment than Simplify Propel. However, SPDR SP Biotech is 2.0 times less risky than Simplify Propel. It trades about -0.07 of its potential returns per unit of risk. Simplify Propel Opportunities is currently generating about -0.25 per unit of risk. If you would invest  9,763  in SPDR SP Biotech on October 25, 2024 and sell it today you would lose (461.00) from holding SPDR SP Biotech or give up 4.72% of portfolio value over 90 days.

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

SPDR SP Biotech  vs.  Simplify Propel Opportunities

SPDR SP Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

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 weak 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.

Pair Trading with SPDR SP and Simplify Propel

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

The idea behind SPDR SP Biotech and Simplify Propel Opportunities 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.