Correlation Between SoFi Select and Invesco Dynamic

Can any of the company-specific risk be diversified away by investing in both SoFi Select and Invesco Dynamic 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 Invesco Dynamic 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 Invesco Dynamic Leisure, you can compare the effects of market volatilities on SoFi Select and Invesco Dynamic 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 Invesco Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoFi Select and Invesco Dynamic.

Diversification Opportunities for SoFi Select and Invesco Dynamic

0.72

Correlation Coefficient

SoFi Select  Invesco Dynamic

Poor diversification

The 3 months correlation between SoFi and Invesco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Select 500 and Invesco Dynamic Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Leisure 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 Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Leisure has no effect on the direction of SoFi Select i.e., SoFi Select and Invesco Dynamic go up and down completely randomly.

Pair Corralation between SoFi Select and Invesco Dynamic

Considering the 90-day investment horizon SoFi Select 500 is expected to under-perform the Invesco Dynamic. But the etf apears to be less risky and, when comparing its historical volatility, SoFi Select 500 is 1.01 times less risky than Invesco Dynamic. The etf trades about -0.1 of its potential returns per unit of risk. The Invesco Dynamic Leisure is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  5,174  in Invesco Dynamic Leisure on December 11, 2024 and sell it today you would lose (294.00) from holding Invesco Dynamic Leisure or give up 5.68% of portfolio value over 90 days.

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

SoFi Select 500  vs.  Invesco Dynamic Leisure

SoFi Select 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoFi Select 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Invesco Dynamic Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Dynamic Leisure has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's technical and fundamental indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the ETF firm stakeholders.

Pair Trading with SoFi Select and Invesco Dynamic

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

The idea behind SoFi Select 500 and Invesco Dynamic Leisure 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.