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 SkyBridge 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
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Simplify is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Trust SkyBridge 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 SkyBridge 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 SkyBridge is expected to generate 3.35 times more return on investment than Simplify Asset. However, First Trust is 3.35 times more volatile than Simplify Asset Management. It trades about 0.23 of its potential returns per unit of risk. Simplify Asset Management is currently generating about 0.25 per unit of risk. If you would invest 1,498 in First Trust SkyBridge on April 27, 2025 and sell it today you would earn a total of 926.00 from holding First Trust SkyBridge or generate 61.82% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 39.68% |
Values | Daily Returns |
First Trust SkyBridge vs. Simplify Asset Management
Performance |
Timeline |
First Trust SkyBridge |
Simplify Asset Management |
Risk-Adjusted Performance
Solid
Weak | Strong |
First Trust and Simplify Asset Volatility Contrast
Predicted Return Density |
Returns |
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.First Trust vs. VanEck Digital Transformation | First Trust vs. Bitwise Crypto Industry | First Trust vs. Global X Blockchain | First Trust vs. First Trust Indxx |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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