Correlation Between Energy Select and Simplify Exchange

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

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

Diversification Opportunities for Energy Select and Simplify Exchange

0.69

Correlation Coefficient

Energy Select  Simplify Exchange

Poor diversification

The 3 months correlation between Energy and Simplify is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Energy Select Sector 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 Energy Select 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 Energy Select Sector 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 Energy Select i.e., Energy Select and Simplify Exchange go up and down completely randomly.

Pair Corralation between Energy Select and Simplify Exchange

Considering the 90-day investment horizon Energy Select Sector is expected to generate 5.37 times more return on investment than Simplify Exchange. However, Energy Select is 5.37 times more volatile than Simplify Exchange Traded. It trades about 0.13 of its potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.12 per unit of risk. If you would invest  7,985  in Energy Select Sector on May 3, 2025 and sell it today you would earn a total of  736.00  from holding Energy Select Sector or generate 9.22% return on investment over 90 days.

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

Energy Select Sector  vs.  Simplify Exchange Traded

Energy Select Sector

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Select Sector are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Energy Select may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Simplify Exchange Traded

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Simplify Exchange is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Select and Simplify Exchange

The main advantage of trading using opposite Energy Select and Simplify Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Select 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 Energy Select Sector 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.