Correlation Between Simplify Interest and SPDR SP

Can any of the company-specific risk be diversified away by investing in both Simplify Interest and SPDR SP 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 Interest and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Simplify Interest Rate and SPDR SP Global, you can compare the effects of market volatilities on Simplify Interest and SPDR SP 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 Interest with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Interest and SPDR SP.

Diversification Opportunities for Simplify Interest and SPDR SP

-0.37

Correlation Coefficient

Simplify Interest  SPDR SP

Very good diversification

The 3 months correlation between Simplify and SPDR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Interest Rate and SPDR SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Global and Simplify Interest 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 Interest Rate are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Global has no effect on the direction of Simplify Interest i.e., Simplify Interest and SPDR SP go up and down completely randomly.

Pair Corralation between Simplify Interest and SPDR SP

Given the investment horizon of 90 days Simplify Interest Rate is expected to generate 3.75 times more return on investment than SPDR SP. However, Simplify Interest is 3.75 times more volatile than SPDR SP Global. It trades about 0.23 of its potential returns per unit of risk. SPDR SP Global is currently generating about -0.1 per unit of risk. If you would invest  4,703  in Simplify Interest Rate on February 1, 2024 and sell it today you would earn a total of  721.00  from holding Simplify Interest Rate or generate 15.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Simplify Interest Rate  vs.  SPDR SP Global

Simplify Interest Rate

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Interest Rate are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Simplify Interest showed solid returns over the last few months and may actually be approaching a breakup point.

SPDR SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, SPDR SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Simplify Interest and SPDR SP

The main advantage of trading using opposite Simplify Interest and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Interest position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.

The idea behind Simplify Interest Rate and SPDR SP Global pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.