Correlation Between Invesco Dynamic and SoFi Next

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

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

Diversification Opportunities for Invesco Dynamic and SoFi Next

0.9

Correlation Coefficient

Invesco Dynamic  SoFi Next

Almost no diversification

The 3 months correlation between Invesco and SoFi is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Dynamic Leisure and SoFi Next 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Next 500 and Invesco Dynamic 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 Invesco Dynamic Leisure are associated (or correlated) with SoFi Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Next 500 has no effect on the direction of Invesco Dynamic i.e., Invesco Dynamic and SoFi Next go up and down completely randomly.

Pair Corralation between Invesco Dynamic and SoFi Next

Considering the 90-day investment horizon Invesco Dynamic Leisure is expected to generate 1.16 times more return on investment than SoFi Next. However, Invesco Dynamic is 1.16 times more volatile than SoFi Next 500. It trades about -0.12 of its potential returns per unit of risk. SoFi Next 500 is currently generating about -0.23 per unit of risk. If you would invest  5,362  in Invesco Dynamic Leisure on October 10, 2024 and sell it today you would lose (151.00) from holding Invesco Dynamic Leisure or give up 2.82% of portfolio value over 90 days.

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

Invesco Dynamic Leisure  vs.  SoFi Next 500

Invesco Dynamic Leisure

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Leisure are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Invesco Dynamic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SoFi Next 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Next 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SoFi Next is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Dynamic and SoFi Next

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

The idea behind Invesco Dynamic Leisure and SoFi Next 500 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.