Correlation Between SoFi Next and SoFi Social

Can any of the company-specific risk be diversified away by investing in both SoFi Next 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 SoFi Next and SoFi Social 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 SoFi Social 50, you can compare the effects of market volatilities on SoFi Next 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 SoFi Next with a short position of SoFi Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoFi Next and SoFi Social.

Diversification Opportunities for SoFi Next and SoFi Social

0.93

Correlation Coefficient

SoFi Next  SoFi Social

Almost no diversification

The 3 months correlation between SoFi and SoFi is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Next 500 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 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 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 SoFi Next i.e., SoFi Next and SoFi Social go up and down completely randomly.

Pair Corralation between SoFi Next and SoFi Social

Given the investment horizon of 90 days SoFi Next 500 is expected to generate 0.65 times more return on investment than SoFi Social. However, SoFi Next 500 is 1.54 times less risky than SoFi Social. It trades about -0.06 of its potential returns per unit of risk. SoFi Social 50 is currently generating about -0.07 per unit of risk. If you would invest  1,481  in SoFi Next 500 on December 26, 2024 and sell it today you would lose (71.00) from holding SoFi Next 500 or give up 4.79% of portfolio value over 90 days.

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

SoFi Next 500  vs.  SoFi Social 50

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 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.

SoFi Social 50

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoFi Social 50 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with SoFi Next and SoFi Social

The main advantage of trading using opposite SoFi Next and SoFi Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoFi Next 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 SoFi Next 500 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.