Correlation Between Simplify Exchange and SPDR BOFA

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

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

Diversification Opportunities for Simplify Exchange and SPDR BOFA

-0.74

Correlation Coefficient

Simplify Exchange  SPDR BOFA

Pay attention - limited upside

The 3 months correlation between Simplify and SPDR is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and SPDR BOFA MERRILL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR BOFA MERRILL and Simplify Exchange 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 Exchange Traded are associated (or correlated) with SPDR BOFA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR BOFA MERRILL has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and SPDR BOFA go up and down completely randomly.

Pair Corralation between Simplify Exchange and SPDR BOFA

Given the investment horizon of 90 days Simplify Exchange Traded is expected to under-perform the SPDR BOFA. But the etf apears to be less risky and, when comparing its historical volatility, Simplify Exchange Traded is 2.26 times less risky than SPDR BOFA. The etf trades about -0.03 of its potential returns per unit of risk. The SPDR BOFA MERRILL is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  959.00  in SPDR BOFA MERRILL on September 4, 2024 and sell it today you would earn a total of  984.00  from holding SPDR BOFA MERRILL or generate 102.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	74.95%
Values	Daily Returns

Simplify Exchange Traded  vs.  SPDR BOFA MERRILL

Simplify Exchange Traded

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Simplify Exchange is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

SPDR BOFA MERRILL

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR BOFA MERRILL are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, SPDR BOFA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplify Exchange and SPDR BOFA

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

The idea behind Simplify Exchange Traded and SPDR BOFA MERRILL 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.