Correlation Between Simplify Exchange and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Simplify Exchange and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Simplify Exchange and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Exchange and Northern Lights.
Diversification Opportunities for Simplify Exchange and Northern Lights
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Simplify and Northern is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and Northern Lights go up and down completely randomly.
Pair Corralation between Simplify Exchange and Northern Lights
Given the investment horizon of 90 days Simplify Exchange Traded is expected to under-perform the Northern Lights. In addition to that, Simplify Exchange is 2.89 times more volatile than Northern Lights. It trades about -0.11 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.12 per unit of volatility. If you would invest 2,896 in Northern Lights on September 1, 2024 and sell it today you would earn a total of 18.00 from holding Northern Lights or generate 0.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simplify Exchange Traded vs. Northern Lights
Performance |
| Timeline |
| Simplify Exchange Traded |
| Northern Lights |
Simplify Exchange and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simplify Exchange and Northern Lights
The main advantage of trading using opposite Simplify Exchange and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Exchange position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Simplify Exchange vs. Cambria Tail Risk | Simplify Exchange vs. IQ Merger Arbitrage | Simplify Exchange vs. Amplify BlackSwan Growth | Simplify Exchange vs. AdvisorShares Dorsey Wright |
| Northern Lights vs. Vanguard Total Stock | Northern Lights vs. SPDR SP 500 | Northern Lights vs. iShares Core SP | Northern Lights vs. Vanguard Dividend Appreciation |
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.
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