Can any of the company-specific risk be diversified away by investing in both Simplify Exchange and Capitol Series 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 Exchange and Capitol Series into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Simplify Exchange Traded and Capitol Series Trust, you can compare the effects of market volatilities on Simplify Exchange and Capitol Series 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 Exchange with a short position of Capitol Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simplify Exchange and Capitol Series.
Diversification Opportunities for Simplify Exchange and Capitol Series
The 3 months correlation between Simplify and Capitol is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Simplify Exchange Traded and Capitol Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Series Trust and Simplify Exchange 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 Exchange Traded are associated (or correlated) with Capitol Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Series Trust has no effect on the direction of Simplify Exchange i.e., Simplify Exchange and Capitol Series go up and down completely randomly.
Pair Corralation between Simplify Exchange and Capitol Series
Given the investment horizon of 90 days Simplify Exchange Traded is expected to under-perform the Capitol Series. But the etf apears to be less risky and, when comparing its historical volatility, Simplify Exchange Traded is 1.69 times less risky than Capitol Series. The etf trades about -0.02 of its potential returns per unit of risk. The Capitol Series Trust is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,928 in Capitol Series Trust on August 30, 2023 and sell it today you would earn a total of 476.00 from holding Capitol Series Trust or generate 16.26% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Simplify Exchange is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Series Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capitol Series is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Simplify Exchange and Capitol Series Volatility Contrast
Predicted Return Density
Pair Trading with Simplify Exchange and Capitol Series
The main advantage of trading using opposite Simplify Exchange and Capitol Series positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simplify Exchange position performs unexpectedly, Capitol Series 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 Capitol Series will offset losses from the drop in Capitol Series' long position.
The idea behind Simplify Exchange Traded and Capitol Series Trust 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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