Correlation Between Dow Jones and SoFi Select
Can any of the company-specific risk be diversified away by investing in both Dow Jones and SoFi Select 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 Dow Jones and SoFi Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and SoFi Select 500, you can compare the effects of market volatilities on Dow Jones and SoFi Select 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 Dow Jones with a short position of SoFi Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and SoFi Select.
Diversification Opportunities for Dow Jones and SoFi Select
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and SoFi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and SoFi Select 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Select 500 and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with SoFi Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Select 500 has no effect on the direction of Dow Jones i.e., Dow Jones and SoFi Select go up and down completely randomly.
Pair Corralation between Dow Jones and SoFi Select
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.69 times less return on investment than SoFi Select. But when comparing it to its historical volatility, Dow Jones Industrial is 1.29 times less risky than SoFi Select. It trades about 0.08 of its potential returns per unit of risk. SoFi Select 500 is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 6,793 in SoFi Select 500 on August 30, 2024 and sell it today you would earn a total of 4,285 from holding SoFi Select 500 or generate 63.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. SoFi Select 500
Performance |
| Timeline |
Dow Jones and SoFi Select Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
SoFi Select 500
Pair trading matchups for SoFi Select
Pair Trading with Dow Jones and SoFi Select
The main advantage of trading using opposite Dow Jones and SoFi Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, SoFi Select 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 Select will offset losses from the drop in SoFi Select's long position.| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
| SoFi Select vs. Berry Petroleum Corp | SoFi Select vs. Comstock Resources | SoFi Select vs. SoFi Next 500 | SoFi Select vs. SM Energy Co |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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