Correlation Between First Trust and Simplify Next

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

Diversification Opportunities for First Trust and Simplify Next

0.94

Correlation Coefficient

First Trust  Simplify Next

Almost no diversification

The 3 months correlation between First and Simplify is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and Simplify Next Intangible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Next Intangible 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 Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Next Intangible has no effect on the direction of First Trust i.e., First Trust and Simplify Next go up and down completely randomly.

Pair Corralation between First Trust and Simplify Next

Given the investment horizon of 90 days First Trust is expected to generate 2.71 times less return on investment than Simplify Next. But when comparing it to its historical volatility, First Trust Exchange Traded is 3.09 times less risky than Simplify Next. It trades about 0.15 of its potential returns per unit of risk. Simplify Next Intangible is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,668  in Simplify Next Intangible on August 23, 2024 and sell it today you would earn a total of  177.00  from holding Simplify Next Intangible or generate 6.63% return on investment over 90 days.

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

First Trust Exchange Traded  vs.  Simplify Next Intangible

First Trust Exchange

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Exchange Traded are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, First Trust is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Simplify Next Intangible

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Next Intangible are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Simplify Next may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Trust and Simplify Next

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

The idea behind First Trust Exchange Traded and Simplify Next Intangible 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.