Correlation Between First Trust and Simplify Exchange
Can any of the company-specific risk be diversified away by investing in both First Trust and Simplify Exchange 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 First Trust and Simplify Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Managed and Simplify Exchange Traded, you can compare the effects of market volatilities on First Trust and Simplify Exchange 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 First Trust with a short position of Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Simplify Exchange.
Diversification Opportunities for First Trust and Simplify Exchange
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Simplify is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded and First Trust 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 First Trust Managed are associated (or correlated) with Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of First Trust i.e., First Trust and Simplify Exchange go up and down completely randomly.
Pair Corralation between First Trust and Simplify Exchange
Considering the 90-day investment horizon First Trust is expected to generate 2.1 times less return on investment than Simplify Exchange. But when comparing it to its historical volatility, First Trust Managed is 1.55 times less risky than Simplify Exchange. It trades about 0.03 of its potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,680 in Simplify Exchange Traded on September 1, 2024 and sell it today you would earn a total of 100.00 from holding Simplify Exchange Traded or generate 3.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Managed vs. Simplify Exchange Traded
Performance |
| Timeline |
| First Trust Managed |
| Simplify Exchange Traded |
First Trust and Simplify Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Simplify Exchange
The main advantage of trading using opposite First Trust and Simplify Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust position performs unexpectedly, Simplify Exchange 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 Exchange will offset losses from the drop in Simplify Exchange's long position.| First Trust vs. WisdomTree Managed Futures | First Trust vs. First Trust LongShort | First Trust vs. First Trust Alternative | First Trust vs. iMGP DBi Managed |
| Simplify Exchange vs. KFA Mount Lucas | Simplify Exchange vs. iMGP DBi Managed | Simplify Exchange vs. Simplify Interest Rate | Simplify Exchange vs. AGFiQ Market Neutral |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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