Correlation Between Simplify Equity and First Trust

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

By analyzing existing cross correlation between Simplify Equity PLUS and First Trust SkyBridge, you can compare the effects of market volatilities on Simplify Equity and First Trust 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 Equity with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Equity and First Trust.

Diversification Opportunities for Simplify Equity and First Trust

0.97

Correlation Coefficient

Simplify Equity  First Trust

Almost no diversification

The 3 months correlation between Simplify and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and First Trust SkyBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SkyBridge and Simplify Equity 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 Equity PLUS are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SkyBridge has no effect on the direction of Simplify Equity i.e., Simplify Equity and First Trust go up and down completely randomly.

Pair Corralation between Simplify Equity and First Trust

Given the investment horizon of 90 days Simplify Equity is expected to generate 3.12 times less return on investment than First Trust. But when comparing it to its historical volatility, Simplify Equity PLUS is 4.18 times less risky than First Trust. It trades about 0.4 of its potential returns per unit of risk. First Trust SkyBridge is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,272  in First Trust SkyBridge on April 21, 2025 and sell it today you would earn a total of  1,223  from holding First Trust SkyBridge or generate 96.15% return on investment over 90 days.

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

Simplify Equity PLUS  vs.  First Trust SkyBridge

Simplify Equity PLUS

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental drivers, Simplify Equity exhibited solid returns over the last few months and may actually be approaching a breakup point.

First Trust SkyBridge

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SkyBridge are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, First Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simplify Equity and First Trust

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

The idea behind Simplify Equity PLUS and First Trust SkyBridge 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.