Correlation Between Simplify Exchange and Soundwatch Hedged

Can any of the company-specific risk be diversified away by investing in both Simplify Exchange and Soundwatch Hedged 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 Soundwatch Hedged 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 Soundwatch Hedged Equity, you can compare the effects of market volatilities on Simplify Exchange and Soundwatch Hedged 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 Soundwatch Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Exchange and Soundwatch Hedged.

Diversification Opportunities for Simplify Exchange and Soundwatch Hedged

1.0

Correlation Coefficient

Simplify Exchange  Soundwatch Hedged

No risk reduction

The 3 months correlation between Simplify and Soundwatch is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and Soundwatch Hedged Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soundwatch Hedged Equity 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 Soundwatch Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soundwatch Hedged Equity has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and Soundwatch Hedged go up and down completely randomly.

Pair Corralation between Simplify Exchange and Soundwatch Hedged

Given the investment horizon of 90 days Simplify Exchange is expected to generate 1.11 times less return on investment than Soundwatch Hedged. But when comparing it to its historical volatility, Simplify Exchange Traded is 1.27 times less risky than Soundwatch Hedged. It trades about 0.26 of its potential returns per unit of risk. Soundwatch Hedged Equity is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,770  in Soundwatch Hedged Equity on September 4, 2024 and sell it today you would earn a total of  234.00  from holding Soundwatch Hedged Equity or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Simplify Exchange Traded  vs.  Soundwatch Hedged Equity

Simplify Exchange Traded

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Simplify Exchange may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Soundwatch Hedged Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Soundwatch Hedged Equity are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Soundwatch Hedged may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simplify Exchange and Soundwatch Hedged

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

The idea behind Simplify Exchange Traded and Soundwatch Hedged Equity 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.