Correlation Between Simplify Equity and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Simplify Equity 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 Equity 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 Equity PLUS and Northern Lights, you can compare the effects of market volatilities on Simplify Equity 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 Equity with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Equity and Northern Lights.
Diversification Opportunities for Simplify Equity and Northern Lights
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Simplify and Northern is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Simplify Equity 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 Equity PLUS 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 Equity i.e., Simplify Equity and Northern Lights go up and down completely randomly.
Pair Corralation between Simplify Equity and Northern Lights
Given the investment horizon of 90 days Simplify Equity PLUS is expected to generate 1.3 times more return on investment than Northern Lights. However, Simplify Equity is 1.3 times more volatile than Northern Lights. It trades about 0.23 of its potential returns per unit of risk. Northern Lights is currently generating about 0.07 per unit of risk. If you would invest 3,635 in Simplify Equity PLUS on August 30, 2024 and sell it today you would earn a total of 350.00 from holding Simplify Equity PLUS or generate 9.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simplify Equity PLUS vs. Northern Lights
Performance |
| Timeline |
| Simplify Equity PLUS |
| Northern Lights |
Simplify Equity and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simplify Equity and Northern Lights
The main advantage of trading using opposite Simplify Equity and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Equity 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 Equity vs. First Trust SkyBridge | Simplify Equity vs. VanEck Digital Transformation | Simplify Equity vs. Global X Blockchain | Simplify Equity vs. Bitcoin Strategy Profund |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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