Correlation Between Simplify Managed and KFA Mount

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

By analyzing existing cross correlation between Simplify Managed Futures and KFA Mount Lucas, you can compare the effects of market volatilities on Simplify Managed and KFA Mount 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 Managed with a short position of KFA Mount. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Managed and KFA Mount.

Diversification Opportunities for Simplify Managed and KFA Mount

0.42

Correlation Coefficient

Simplify Managed  KFA Mount

Very weak diversification

The 3 months correlation between Simplify and KFA is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Managed Futures and KFA Mount Lucas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KFA Mount Lucas and Simplify Managed 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 Managed Futures are associated (or correlated) with KFA Mount. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KFA Mount Lucas has no effect on the direction of Simplify Managed i.e., Simplify Managed and KFA Mount go up and down completely randomly.

Pair Corralation between Simplify Managed and KFA Mount

Considering the 90-day investment horizon Simplify Managed is expected to generate 2.5 times less return on investment than KFA Mount. In addition to that, Simplify Managed is 1.37 times more volatile than KFA Mount Lucas. It trades about 0.01 of its total potential returns per unit of risk. KFA Mount Lucas is currently generating about 0.04 per unit of volatility. If you would invest  2,646  in KFA Mount Lucas on May 22, 2025 and sell it today you would earn a total of  36.00  from holding KFA Mount Lucas or generate 1.36% return on investment over 90 days.

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

Simplify Managed Futures  vs.  KFA Mount Lucas

Simplify Managed Futures

Risk-Adjusted Performance

Weakest

Over the last 90 days Simplify Managed Futures has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Simplify Managed is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KFA Mount Lucas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KFA Mount Lucas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, KFA Mount is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Simplify Managed and KFA Mount

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

The idea behind Simplify Managed Futures and KFA Mount Lucas 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.