Correlation Between SoFi Next and SoFi Select
Can any of the company-specific risk be diversified away by investing in both SoFi Next 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 SoFi Next and SoFi Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SoFi Next 500 and SoFi Select 500, you can compare the effects of market volatilities on SoFi Next 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 SoFi Next with a short position of SoFi Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoFi Next and SoFi Select.
Diversification Opportunities for SoFi Next and SoFi Select
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SoFi and SoFi is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Next 500 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 SoFi Next 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 SoFi Next 500 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 SoFi Next i.e., SoFi Next and SoFi Select go up and down completely randomly.
Pair Corralation between SoFi Next and SoFi Select
Given the investment horizon of 90 days SoFi Next 500 is expected to generate 1.28 times more return on investment than SoFi Select. However, SoFi Next is 1.28 times more volatile than SoFi Select 500. It trades about 0.26 of its potential returns per unit of risk. SoFi Select 500 is currently generating about 0.12 per unit of risk. If you would invest 1,446 in SoFi Next 500 on August 30, 2024 and sell it today you would earn a total of 122.00 from holding SoFi Next 500 or generate 8.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
SoFi Next 500 vs. SoFi Select 500
Performance |
| Timeline |
| SoFi Next 500 |
| SoFi Select 500 |
SoFi Next and SoFi Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SoFi Next and SoFi Select
The main advantage of trading using opposite SoFi Next and SoFi Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoFi Next 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.The idea behind SoFi Next 500 and SoFi Select 500 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.| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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