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 Preferred, 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
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Simplify and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Equity PLUS and First Trust Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Preferred 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 Preferred 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 PLUS is expected to generate 4.65 times more return on investment than First Trust. However, Simplify Equity is 4.65 times more volatile than First Trust Preferred. It trades about 0.13 of its potential returns per unit of risk. First Trust Preferred is currently generating about 0.23 per unit of risk. If you would invest 3,652 in Simplify Equity PLUS on April 9, 2025 and sell it today you would earn a total of 470.00 from holding Simplify Equity PLUS or generate 12.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Simplify Equity PLUS vs. First Trust Preferred
Performance |
| Timeline |
| Simplify Equity PLUS |
| First Trust Preferred |
Simplify Equity and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
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.| Simplify Equity vs. FT Vest Equity | Simplify Equity vs. Northern Lights | Simplify Equity vs. Dimensional International High | Simplify Equity vs. JPMorgan Fundamental Data |
| First Trust vs. Strategy Shares | First Trust vs. Freedom Day Dividend | First Trust vs. Franklin Templeton ETF | First Trust vs. iShares MSCI China |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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