Correlation Between IShares Factors and SoFi Social

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

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

Diversification Opportunities for IShares Factors and SoFi Social

0.81

Correlation Coefficient

IShares Factors  SoFi Social

Very poor diversification

The 3 months correlation between IShares and SoFi is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Factors Growth 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 IShares Factors 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 iShares Factors Growth 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 IShares Factors i.e., IShares Factors and SoFi Social go up and down completely randomly.

Pair Corralation between IShares Factors and SoFi Social

Given the investment horizon of 90 days IShares Factors is expected to generate 1.95 times less return on investment than SoFi Social. But when comparing it to its historical volatility, iShares Factors Growth is 1.12 times less risky than SoFi Social. It trades about 0.17 of its potential returns per unit of risk. SoFi Social 50 is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  3,599  in SoFi Social 50 on September 16, 2024 and sell it today you would earn a total of  897.00  from holding SoFi Social 50 or generate 24.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.77%
Values	Daily Returns

iShares Factors Growth  vs.  SoFi Social 50

iShares Factors Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Factors Growth are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, IShares Factors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 weak basic indicators, SoFi Social reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Factors and SoFi Social

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

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.