Correlation Between SOFR and REX AI

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

By analyzing existing cross correlation between SOFR and REX AI Equity, you can compare the effects of market volatilities on SOFR and REX AI 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 SOFR with a short position of REX AI. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFR and REX AI.

Diversification Opportunities for SOFR and REX AI

0.92

Correlation Coefficient

SOFR  REX AI

Almost no diversification

The 3 months correlation between SOFR and REX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and REX AI Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX AI Equity and SOFR 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 SOFR are associated (or correlated) with REX AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX AI Equity has no effect on the direction of SOFR i.e., SOFR and REX AI go up and down completely randomly.

Pair Corralation between SOFR and REX AI

Given the investment horizon of 90 days SOFR is expected to generate 9.87 times less return on investment than REX AI. But when comparing it to its historical volatility, SOFR is 11.98 times less risky than REX AI. It trades about 0.22 of its potential returns per unit of risk. REX AI Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,479  in REX AI Equity on October 1, 2024 and sell it today you would earn a total of  509.00  from holding REX AI Equity or generate 11.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

SOFR  vs.  REX AI Equity

SOFR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, SOFR is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

REX AI Equity

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REX AI Equity are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, REX AI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SOFR and REX AI

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

The idea behind SOFR and REX AI Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.