Correlation Between Simplify Macro and ProShares Hedge

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

By analyzing existing cross correlation between Simplify Macro Strategy and ProShares Hedge Replication, you can compare the effects of market volatilities on Simplify Macro and ProShares Hedge 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 Macro with a short position of ProShares Hedge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Macro and ProShares Hedge.

Diversification Opportunities for Simplify Macro and ProShares Hedge

0.46

Correlation Coefficient

Simplify Macro  ProShares Hedge

Very weak diversification

The 3 months correlation between Simplify and ProShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Macro Strategy and ProShares Hedge Replication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Hedge Repl and Simplify Macro 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 Macro Strategy are associated (or correlated) with ProShares Hedge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Hedge Repl has no effect on the direction of Simplify Macro i.e., Simplify Macro and ProShares Hedge go up and down completely randomly.

Pair Corralation between Simplify Macro and ProShares Hedge

Considering the 90-day investment horizon Simplify Macro Strategy is expected to generate 2.12 times more return on investment than ProShares Hedge. However, Simplify Macro is 2.12 times more volatile than ProShares Hedge Replication. It trades about 0.1 of its potential returns per unit of risk. ProShares Hedge Replication is currently generating about 0.12 per unit of risk. If you would invest  2,142  in Simplify Macro Strategy on September 4, 2024 and sell it today you would earn a total of  100.00  from holding Simplify Macro Strategy or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Simplify Macro Strategy  vs.  ProShares Hedge Replication

Simplify Macro Strategy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Macro Strategy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Simplify Macro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares Hedge Repl

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Hedge Replication are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, ProShares Hedge is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Simplify Macro and ProShares Hedge

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

The idea behind Simplify Macro Strategy and ProShares Hedge Replication 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.