Correlation Between Dow Jones and Simplify Equity
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Simplify Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Simplify Equity PLUS, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Simplify Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Simplify Equity.
Diversification Opportunities for Dow Jones and Simplify Equity
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Simplify is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Simplify Equity go up and down completely randomly.
Pair Corralation between Dow Jones and Simplify Equity
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.13 times less return on investment than Simplify Equity. But when comparing it to its historical volatility, Dow Jones Industrial is 1.31 times less risky than Simplify Equity. It trades about 0.37 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 4,147 in Simplify Equity PLUS on September 1, 2024 and sell it today you would earn a total of 369.00 from holding Simplify Equity PLUS or generate 8.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Simplify Equity PLUS
Performance |
| Timeline |
Dow Jones and Simplify Equity Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Simplify Equity PLUS
Pair trading matchups for Simplify Equity
Pair Trading with Dow Jones and Simplify Equity
The main advantage of trading using opposite Dow Jones and Simplify Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |