Correlation Between American Funds and SoFi Next
Can any of the company-specific risk be diversified away by investing in both American Funds and SoFi Next 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 American Funds and SoFi Next into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Fundamental and SoFi Next 500, you can compare the effects of market volatilities on American Funds and SoFi Next 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 American Funds with a short position of SoFi Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and SoFi Next.
Diversification Opportunities for American Funds and SoFi Next
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and SoFi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Fundamental and SoFi Next 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Next 500 and American Funds 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 American Funds Fundamental are associated (or correlated) with SoFi Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Next 500 has no effect on the direction of American Funds i.e., American Funds and SoFi Next go up and down completely randomly.
Pair Corralation between American Funds and SoFi Next
Assuming the 90 days horizon American Funds is expected to generate 1.86 times less return on investment than SoFi Next. But when comparing it to its historical volatility, American Funds Fundamental is 1.02 times less risky than SoFi Next. It trades about 0.12 of its potential returns per unit of risk. SoFi Next 500 is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,463 in SoFi Next 500 on October 23, 2024 and sell it today you would earn a total of 49.00 from holding SoFi Next 500 or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Fundamental vs. SoFi Next 500
Performance |
| Timeline |
| American Funds Funda |
| SoFi Next 500 |
American Funds and SoFi Next Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and SoFi Next
The main advantage of trading using opposite American Funds and SoFi Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, SoFi Next 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 SoFi Next will offset losses from the drop in SoFi Next's long position.| American Funds vs. Small Pany Growth | American Funds vs. Needham Small Cap | American Funds vs. Praxis Small Cap | American Funds vs. Franklin Small Cap |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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