Correlation Between Simplify Exchange and First Trust

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

Diversification Opportunities for Simplify Exchange and First Trust

-0.58

Correlation Coefficient

Simplify Exchange  First Trust

Excellent diversification

The 3 months correlation between Simplify and First is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dorsey has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and First Trust go up and down completely randomly.

Pair Corralation between Simplify Exchange and First Trust

Given the investment horizon of 90 days Simplify Exchange Traded is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Simplify Exchange Traded is 1.65 times less risky than First Trust. The etf trades about -0.02 of its potential returns per unit of risk. The First Trust Dorsey is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,769  in First Trust Dorsey on May 15, 2025 and sell it today you would earn a total of  325.00  from holding First Trust Dorsey or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Simplify Exchange Traded  vs.  First Trust Dorsey

Simplify Exchange Traded

Risk-Adjusted Performance

Weakest

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 fundamental indicators, Simplify Exchange is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

First Trust Dorsey

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dorsey are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Trust is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Simplify Exchange and First Trust

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

The idea behind Simplify Exchange Traded and First Trust Dorsey 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.