Correlation Between Simplify Exchange and First Trust
Can any of the company-specific risk be diversified away by investing in both Simplify Exchange and First Trust 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 First Trust 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 First Trust LongShort, you can compare the effects of market volatilities on Simplify Exchange and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Exchange and First Trust.
Diversification Opportunities for Simplify Exchange and First Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Simplify and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and First Trust LongShort in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust LongShort 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust LongShort has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and First Trust go up and down completely randomly.
Pair Corralation between Simplify Exchange and First Trust
Considering the 90-day investment horizon Simplify Exchange is expected to generate 1.05 times less return on investment than First Trust. In addition to that, Simplify Exchange is 1.74 times more volatile than First Trust LongShort. It trades about 0.14 of its total potential returns per unit of risk. First Trust LongShort is currently generating about 0.25 per unit of volatility. If you would invest 6,421 in First Trust LongShort on August 31, 2024 and sell it today you would earn a total of 178.00 from holding First Trust LongShort or generate 2.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simplify Exchange Traded vs. First Trust LongShort
Performance |
| Timeline |
| Simplify Exchange Traded |
| First Trust LongShort |
Simplify Exchange and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simplify Exchange and First Trust
The main advantage of trading using opposite Simplify Exchange and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Exchange position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Simplify Exchange vs. KFA Mount Lucas | Simplify Exchange vs. iMGP DBi Managed | Simplify Exchange vs. Simplify Interest Rate | Simplify Exchange vs. AGFiQ Market Neutral |
| First Trust vs. First Trust Managed | First Trust vs. IQ Hedge Multi Strategy | First Trust vs. First Trust BuyWrite | First Trust vs. SPDR SSgA Global |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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