Correlation Between SoFi Select and SoFi Social

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

By analyzing existing cross correlation between SoFi Select 500 and SoFi Social 50, you can compare the effects of market volatilities on SoFi Select 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 SoFi Select with a short position of SoFi Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoFi Select and SoFi Social.

Diversification Opportunities for SoFi Select and SoFi Social

0.95

Correlation Coefficient

SoFi Select  SoFi Social

Almost no diversification

The 3 months correlation between SoFi and SoFi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Select 500 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 SoFi Select 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 Select 500 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 SoFi Select i.e., SoFi Select and SoFi Social go up and down completely randomly.

Pair Corralation between SoFi Select and SoFi Social

Considering the 90-day investment horizon SoFi Select is expected to generate 2.2 times less return on investment than SoFi Social. But when comparing it to its historical volatility, SoFi Select 500 is 1.37 times less risky than SoFi Social. It trades about 0.31 of its potential returns per unit of risk. SoFi Social 50 is currently generating about 0.5 of returns per unit of risk over similar time horizon. If you would invest  3,749  in SoFi Social 50 on September 4, 2024 and sell it today you would earn a total of  541.00  from holding SoFi Social 50 or generate 14.43% return on investment over 90 days.

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

SoFi Select 500  vs.  SoFi Social 50

SoFi Select 500

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Select 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, SoFi Select showed solid returns over the last few months and may actually be approaching a breakup point.

SoFi Social 50

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Social 50 are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SoFi Social reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoFi Select and SoFi Social

The main advantage of trading using opposite SoFi Select and SoFi Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoFi Select 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 SoFi Select 500 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.