Correlation Between ProShares VIX and Simplify Macro

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Can any of the company-specific risk be diversified away by investing in both ProShares VIX and Simplify Macro 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 ProShares VIX and Simplify Macro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProShares VIX Short Term and Simplify Macro Strategy, you can compare the effects of market volatilities on ProShares VIX and Simplify Macro 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 ProShares VIX with a short position of Simplify Macro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares VIX and Simplify Macro.

Diversification Opportunities for ProShares VIX and Simplify Macro

0.05
  Correlation Coefficient

Significant diversification

The 3 months correlation between ProShares and Simplify is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding ProShares VIX Short-Term and Simplify Macro Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Macro Strategy and ProShares VIX 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 ProShares VIX Short Term are associated (or correlated) with Simplify Macro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Macro Strategy has no effect on the direction of ProShares VIX i.e., ProShares VIX and Simplify Macro go up and down completely randomly.

Pair Corralation between ProShares VIX and Simplify Macro

Given the investment horizon of 90 days ProShares VIX Short Term is expected to under-perform the Simplify Macro. In addition to that, ProShares VIX is 8.19 times more volatile than Simplify Macro Strategy. It trades about -0.17 of its total potential returns per unit of risk. Simplify Macro Strategy is currently generating about -0.15 per unit of volatility. If you would invest  2,295  in Simplify Macro Strategy on December 3, 2023 and sell it today you would lose (23.00) from holding Simplify Macro Strategy or give up 1.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProShares VIX Short-Term  vs.  Simplify Macro Strategy

 Performance 
       Timeline  
ProShares VIX Short-Term 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days ProShares VIX Short Term has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.
Simplify Macro Strategy 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Simplify Macro Strategy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Simplify Macro is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

ProShares VIX and Simplify Macro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProShares VIX and Simplify Macro

The main advantage of trading using opposite ProShares VIX and Simplify Macro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProShares VIX position performs unexpectedly, Simplify Macro 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 Macro will offset losses from the drop in Simplify Macro's long position.
The idea behind ProShares VIX Short Term and Simplify Macro Strategy 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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