Correlation Between Simplify Volatility and ETRACS Monthly

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

By analyzing existing cross correlation between Simplify Volatility Premium and ETRACS Monthly Pay, you can compare the effects of market volatilities on Simplify Volatility and ETRACS Monthly 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 Volatility with a short position of ETRACS Monthly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Volatility and ETRACS Monthly.

Diversification Opportunities for Simplify Volatility and ETRACS Monthly

0.96

Correlation Coefficient

Simplify Volatility  ETRACS Monthly

Almost no diversification

The 3 months correlation between Simplify and ETRACS is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Volatility Premium and ETRACS Monthly Pay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETRACS Monthly Pay and Simplify Volatility 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 Volatility Premium are associated (or correlated) with ETRACS Monthly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETRACS Monthly Pay has no effect on the direction of Simplify Volatility i.e., Simplify Volatility and ETRACS Monthly go up and down completely randomly.

Pair Corralation between Simplify Volatility and ETRACS Monthly

Given the investment horizon of 90 days Simplify Volatility Premium is expected to under-perform the ETRACS Monthly. In addition to that, Simplify Volatility is 1.7 times more volatile than ETRACS Monthly Pay. It trades about -0.07 of its total potential returns per unit of risk. ETRACS Monthly Pay is currently generating about -0.04 per unit of volatility. If you would invest  1,963  in ETRACS Monthly Pay on February 11, 2025 and sell it today you would lose (138.50) from holding ETRACS Monthly Pay or give up 7.06% of portfolio value over 90 days.

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

Simplify Volatility Premium  vs.  ETRACS Monthly Pay

Simplify Volatility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simplify Volatility Premium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's basic indicators remain quite persistent which may send shares a bit higher in June 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

ETRACS Monthly Pay

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETRACS Monthly Pay has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ETRACS Monthly is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Simplify Volatility and ETRACS Monthly

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

The idea behind Simplify Volatility Premium and ETRACS Monthly Pay 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.