Correlation Between Simplify Interest and Invesco Agriculture

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

Diversification Opportunities for Simplify Interest and Invesco Agriculture

0.3

Correlation Coefficient

Simplify Interest  Invesco Agriculture

Weak diversification

The 3 months correlation between Simplify and Invesco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Interest Rate and Invesco Agriculture Commodity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Agriculture 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 Invesco Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Agriculture has no effect on the direction of Simplify Interest i.e., Simplify Interest and Invesco Agriculture go up and down completely randomly.

Pair Corralation between Simplify Interest and Invesco Agriculture

Given the investment horizon of 90 days Simplify Interest Rate is expected to generate 2.71 times more return on investment than Invesco Agriculture. However, Simplify Interest is 2.71 times more volatile than Invesco Agriculture Commodity. It trades about 0.11 of its potential returns per unit of risk. Invesco Agriculture Commodity is currently generating about 0.14 per unit of risk. If you would invest  3,949  in Simplify Interest Rate on September 5, 2024 and sell it today you would earn a total of  642.00  from holding Simplify Interest Rate or generate 16.26% return on investment over 90 days.

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

Simplify Interest Rate  vs.  Invesco Agriculture Commodity

Simplify Interest Rate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Interest Rate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Simplify Interest showed solid returns over the last few months and may actually be approaching a breakup point.

Invesco Agriculture

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Agriculture Commodity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Invesco Agriculture may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Simplify Interest and Invesco Agriculture

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

The idea behind Simplify Interest Rate and Invesco Agriculture Commodity 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 Stocks Directory module to find actively traded stocks across global markets.