Correlation Between Valued Advisers and SOFR

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

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

Diversification Opportunities for Valued Advisers and SOFR

0.86

Correlation Coefficient

Valued Advisers  SOFR

Very poor diversification

The 3 months correlation between Valued and SOFR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Valued Advisers Trust and SOFR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFR and Valued Advisers 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 Valued Advisers Trust 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 Valued Advisers i.e., Valued Advisers and SOFR go up and down completely randomly.

Pair Corralation between Valued Advisers and SOFR

Given the investment horizon of 90 days Valued Advisers Trust is expected to generate 4.06 times more return on investment than SOFR. However, Valued Advisers is 4.06 times more volatile than SOFR. It trades about 0.11 of its potential returns per unit of risk. SOFR is currently generating about 0.38 per unit of risk. If you would invest  2,549  in Valued Advisers Trust on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Valued Advisers Trust or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Valued Advisers Trust  vs.  SOFR

Valued Advisers Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valued Advisers Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Valued Advisers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Valued Advisers and SOFR

The main advantage of trading using opposite Valued Advisers and SOFR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valued Advisers 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 Valued Advisers Trust 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.