Correlation Between DSJA and SOFR

Can any of the company-specific risk be diversified away by investing in both DSJA and SOFR 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 DSJA and SOFR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DSJA and SOFR, you can compare the effects of market volatilities on DSJA and SOFR 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 DSJA with a short position of SOFR. Check out your portfolio center. Please also check ongoing floating volatility patterns of DSJA and SOFR.

Diversification Opportunities for DSJA and SOFR

0.97

Correlation Coefficient

DSJA  SOFR

Almost no diversification

The 3 months correlation between DSJA and SOFR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding DSJA and SOFR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFR and DSJA 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 DSJA are associated (or correlated) with SOFR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFR has no effect on the direction of DSJA i.e., DSJA and SOFR go up and down completely randomly.

Pair Corralation between DSJA and SOFR

If you would invest  10,011  in SOFR on September 23, 2024 and sell it today you would earn a total of  39.00  from holding SOFR or generate 0.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	4.76%
Values	Daily Returns

DSJA  vs.  SOFR

DSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, DSJA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SOFR

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFR are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, SOFR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with DSJA and SOFR

The main advantage of trading using opposite DSJA and SOFR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DSJA position performs unexpectedly, SOFR 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 SOFR will offset losses from the drop in SOFR's long position.

The idea behind DSJA and SOFR 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.