Correlation Between Simplify Bitcoin and Northern Lights

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

By analyzing existing cross correlation between Simplify Bitcoin Strategy and Northern Lights, you can compare the effects of market volatilities on Simplify Bitcoin and Northern Lights 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 Bitcoin with a short position of Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Bitcoin and Northern Lights.

Diversification Opportunities for Simplify Bitcoin and Northern Lights

0.68

Correlation Coefficient

Simplify Bitcoin  Northern Lights

Poor diversification

The 3 months correlation between Simplify and Northern is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Bitcoin Strategy and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights and Simplify Bitcoin 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 Bitcoin Strategy are associated (or correlated) with Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Simplify Bitcoin i.e., Simplify Bitcoin and Northern Lights go up and down completely randomly.

Pair Corralation between Simplify Bitcoin and Northern Lights

Given the investment horizon of 90 days Simplify Bitcoin Strategy is expected to generate 3.95 times more return on investment than Northern Lights. However, Simplify Bitcoin is 3.95 times more volatile than Northern Lights. It trades about 0.1 of its potential returns per unit of risk. Northern Lights is currently generating about 0.08 per unit of risk. If you would invest  1,069  in Simplify Bitcoin Strategy on September 12, 2024 and sell it today you would earn a total of  1,948  from holding Simplify Bitcoin Strategy or generate 182.23% return on investment over 90 days.

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

Simplify Bitcoin Strategy  vs.  Northern Lights

Simplify Bitcoin Strategy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Bitcoin Strategy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Simplify Bitcoin demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Northern Lights

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Lights are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northern Lights is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Simplify Bitcoin and Northern Lights

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

The idea behind Simplify Bitcoin Strategy and Northern Lights 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..