Correlation Between First Trust and Simplify Asset

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

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

Diversification Opportunities for First Trust and Simplify Asset

0.45

Correlation Coefficient

First Trust  Simplify Asset

Very weak diversification

The 3 months correlation between First and Simplify is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Simplify Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Asset Management and First Trust 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 First Trust Exchange Traded are associated (or correlated) with Simplify Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Asset Management has no effect on the direction of First Trust i.e., First Trust and Simplify Asset go up and down completely randomly.

Pair Corralation between First Trust and Simplify Asset

Given the investment horizon of 90 days First Trust Exchange Traded is expected to generate 0.17 times more return on investment than Simplify Asset. However, First Trust Exchange Traded is 5.95 times less risky than Simplify Asset. It trades about 0.19 of its potential returns per unit of risk. Simplify Asset Management is currently generating about 0.01 per unit of risk. If you would invest  1,891  in First Trust Exchange Traded on September 30, 2024 and sell it today you would earn a total of  117.00  from holding First Trust Exchange Traded or generate 6.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.68%
Values	Daily Returns

First Trust Exchange Traded  vs.  Simplify Asset Management

First Trust Exchange

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, First Trust is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Simplify Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simplify Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Simplify Asset is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with First Trust and Simplify Asset

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

The idea behind First Trust Exchange Traded and Simplify Asset Management 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.