Correlation Between GM and SoFi Social
Can any of the company-specific risk be diversified away by investing in both GM and SoFi Social 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 GM and SoFi Social into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and SoFi Social 50, you can compare the effects of market volatilities on GM and SoFi Social 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 GM with a short position of SoFi Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and SoFi Social.
Diversification Opportunities for GM and SoFi Social
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and SoFi is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and SoFi Social 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Social 50 and GM 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 General Motors are associated (or correlated) with SoFi Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Social 50 has no effect on the direction of GM i.e., GM and SoFi Social go up and down completely randomly.
Pair Corralation between GM and SoFi Social
Allowing for the 90-day total investment horizon GM is expected to generate 1.13 times less return on investment than SoFi Social. In addition to that, GM is 1.49 times more volatile than SoFi Social 50. It trades about 0.08 of its total potential returns per unit of risk. SoFi Social 50 is currently generating about 0.13 per unit of volatility. If you would invest 3,326 in SoFi Social 50 on September 1, 2024 and sell it today you would earn a total of 935.00 from holding SoFi Social 50 or generate 28.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. SoFi Social 50
Performance |
| Timeline |
| General Motors |
| SoFi Social 50 |
GM and SoFi Social Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and SoFi Social
The main advantage of trading using opposite GM and SoFi Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, SoFi Social 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 Social will offset losses from the drop in SoFi Social's long position.The idea behind General Motors and SoFi Social 50 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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