Correlation Between Simplify Equity and First Trust
Can any of the company-specific risk be diversified away by investing in both Simplify Equity 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 Equity 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 Equity PLUS and First Trust Indxx, you can compare the effects of market volatilities on Simplify Equity 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 Equity with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Equity and First Trust.
Diversification Opportunities for Simplify Equity and First Trust
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Simplify and First is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 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 Indxx has no effect on the direction of Simplify Equity i.e., Simplify Equity and First Trust go up and down completely randomly.
Pair Corralation between Simplify Equity and First Trust
Given the investment horizon of 90 days Simplify Equity PLUS is expected to generate 1.54 times more return on investment than First Trust. However, Simplify Equity is 1.54 times more volatile than First Trust Indxx. It trades about 0.25 of its potential returns per unit of risk. First Trust Indxx is currently generating about -0.01 per unit of risk. If you would invest 3,741 in Simplify Equity PLUS on August 30, 2024 and sell it today you would earn a total of 244.00 from holding Simplify Equity PLUS or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Simplify Equity PLUS vs. First Trust Indxx
Performance |
| Timeline |
| Simplify Equity PLUS |
| First Trust Indxx |
Simplify Equity and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Simplify Equity and First Trust
The main advantage of trading using opposite Simplify Equity and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Equity 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 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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