Correlation Between Simplify Stable and Proshares Russell

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

By analyzing existing cross correlation between Simplify Stable Income and Proshares Russell 2000, you can compare the effects of market volatilities on Simplify Stable and Proshares Russell 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 Stable with a short position of Proshares Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Stable and Proshares Russell.

Diversification Opportunities for Simplify Stable and Proshares Russell

0.52

Correlation Coefficient

Simplify Stable  Proshares Russell

Very weak diversification

The 3 months correlation between Simplify and Proshares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Stable Income and Proshares Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proshares Russell 2000 and Simplify Stable 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 Stable Income are associated (or correlated) with Proshares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proshares Russell 2000 has no effect on the direction of Simplify Stable i.e., Simplify Stable and Proshares Russell go up and down completely randomly.

Pair Corralation between Simplify Stable and Proshares Russell

Given the investment horizon of 90 days Simplify Stable is expected to generate 10.59 times less return on investment than Proshares Russell. But when comparing it to its historical volatility, Simplify Stable Income is 21.43 times less risky than Proshares Russell. It trades about 0.11 of its potential returns per unit of risk. Proshares Russell 2000 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,887  in Proshares Russell 2000 on September 12, 2024 and sell it today you would earn a total of  370.00  from holding Proshares Russell 2000 or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Simplify Stable Income  vs.  Proshares Russell 2000

Simplify Stable Income

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Stable Income are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Simplify Stable is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Proshares Russell 2000

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares Russell 2000 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Proshares Russell displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplify Stable and Proshares Russell

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

The idea behind Simplify Stable Income and Proshares Russell 2000 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.