Correlation Between SoFi Next and VanEck China

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

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

Diversification Opportunities for SoFi Next and VanEck China

-0.25

Correlation Coefficient

SoFi Next  VanEck China

Very good diversification

The 3 months correlation between SoFi and VanEck is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Next 500 and VanEck China Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck China Bond and SoFi Next 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 Next 500 are associated (or correlated) with VanEck China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck China Bond has no effect on the direction of SoFi Next i.e., SoFi Next and VanEck China go up and down completely randomly.

Pair Corralation between SoFi Next and VanEck China

Given the investment horizon of 90 days SoFi Next 500 is expected to under-perform the VanEck China. In addition to that, SoFi Next is 4.04 times more volatile than VanEck China Bond. It trades about -0.08 of its total potential returns per unit of risk. VanEck China Bond is currently generating about 0.01 per unit of volatility. If you would invest  2,199  in VanEck China Bond on December 29, 2024 and sell it today you would earn a total of  4.00  from holding VanEck China Bond or generate 0.18% return on investment over 90 days.

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

SoFi Next 500  vs.  VanEck China Bond

SoFi Next 500

Risk-Adjusted Performance

Very Weak

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

VanEck China Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck China Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, VanEck China is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SoFi Next and VanEck China

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

The idea behind SoFi Next 500 and VanEck China Bond 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.