Correlation Between SoFi Social and SoFi Next

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

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

Diversification Opportunities for SoFi Social and SoFi Next

0.47

Correlation Coefficient

SoFi Social  SoFi Next

Very weak diversification

The 3 months correlation between SoFi and SoFi is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Social 50 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 SoFi Social 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 Social 50 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 SoFi Social i.e., SoFi Social and SoFi Next go up and down completely randomly.

Pair Corralation between SoFi Social and SoFi Next

Given the investment horizon of 90 days SoFi Social 50 is expected to generate 1.29 times more return on investment than SoFi Next. However, SoFi Social is 1.29 times more volatile than SoFi Next 500. It trades about 0.18 of its potential returns per unit of risk. SoFi Next 500 is currently generating about 0.09 per unit of risk. If you would invest  3,834  in SoFi Social 50 on October 24, 2024 and sell it today you would earn a total of  646.00  from holding SoFi Social 50 or generate 16.85% return on investment over 90 days.

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

SoFi Social 50  vs.  SoFi Next 500

SoFi Social 50

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Social 50 are ranked lower than 14 (%) 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.

SoFi Next 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Next 500 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SoFi Next may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SoFi Social and SoFi Next

The main advantage of trading using opposite SoFi Social and SoFi Next positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoFi Social 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 SoFi Social 50 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.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.