Correlation Between MicroSectors FANG and Simplify Exchange

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

By analyzing existing cross correlation between MicroSectors FANG Index and Simplify Exchange Traded, you can compare the effects of market volatilities on MicroSectors FANG and Simplify Exchange 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 MicroSectors FANG with a short position of Simplify Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Simplify Exchange.

Diversification Opportunities for MicroSectors FANG and Simplify Exchange

-0.9

Correlation Coefficient

MicroSectors FANG  Simplify Exchange

Pay attention - limited upside

The 3 months correlation between MicroSectors and Simplify is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Simplify Exchange go up and down completely randomly.

Pair Corralation between MicroSectors FANG and Simplify Exchange

Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Simplify Exchange. In addition to that, MicroSectors FANG is 2.54 times more volatile than Simplify Exchange Traded. It trades about -0.4 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.19 per unit of volatility. If you would invest  2,567  in Simplify Exchange Traded on April 20, 2025 and sell it today you would earn a total of  479.00  from holding Simplify Exchange Traded or generate 18.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

MicroSectors FANG Index  vs.  Simplify Exchange Traded

MicroSectors FANG Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors FANG Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's technical and fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Simplify Exchange Traded

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Simplify Exchange unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroSectors FANG and Simplify Exchange

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

The idea behind MicroSectors FANG Index and Simplify Exchange Traded 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.