Correlation Between NYSE Composite and SoFi Select
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and SoFi Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and SoFi Select 500, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of SoFi Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and SoFi Select.
Diversification Opportunities for NYSE Composite and SoFi Select
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NYSE and SoFi is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and SoFi Select go up and down completely randomly.
Pair Corralation between NYSE Composite and SoFi Select
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the SoFi Select. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 1.35 times less risky than SoFi Select. The index trades about -0.16 of its potential returns per unit of risk. The SoFi Select 500 is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 1,851 in SoFi Select 500 on February 3, 2024 and sell it today you would lose (46.00) from holding SoFi Select 500 or give up 2.49% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
NYSE Composite vs. SoFi Select 500
Performance |
Timeline |
NYSE Composite and SoFi Select Volatility Contrast
Predicted Return Density |
Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
SoFi Select 500
Pair trading matchups for SoFi Select
Pair Trading with NYSE Composite and SoFi Select
The main advantage of trading using opposite NYSE Composite and SoFi Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.NYSE Composite vs. Amkor Technology | NYSE Composite vs. MACOM Technology Solutions | NYSE Composite vs. Weibo Corp | NYSE Composite vs. NETGEAR |
SoFi Select vs. First Trust Large | SoFi Select vs. First Trust Small | SoFi Select vs. First Trust Large | SoFi Select vs. First Trust Mid |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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