Correlation Between SOFR and Valued Advisers

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

By analyzing existing cross correlation between SOFR and Valued Advisers Trust, you can compare the effects of market volatilities on SOFR and Valued Advisers 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 Valued Advisers. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFR and Valued Advisers.

Diversification Opportunities for SOFR and Valued Advisers

0.86

Correlation Coefficient

SOFR  Valued Advisers

Very poor diversification

The 3 months correlation between SOFR and Valued is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and Valued Advisers Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valued Advisers Trust 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 Valued Advisers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valued Advisers Trust has no effect on the direction of SOFR i.e., SOFR and Valued Advisers go up and down completely randomly.

Pair Corralation between SOFR and Valued Advisers

Given the investment horizon of 90 days SOFR is expected to generate 1.12 times less return on investment than Valued Advisers. But when comparing it to its historical volatility, SOFR is 4.06 times less risky than Valued Advisers. It trades about 0.38 of its potential returns per unit of risk. Valued Advisers Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,549  in Valued Advisers Trust on September 23, 2024 and sell it today you would earn a total of  11.00  from holding Valued Advisers Trust or generate 0.43% return on investment over 90 days.

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

SOFR  vs.  Valued Advisers Trust

SOFR

Risk-Adjusted Performance

38 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFR are ranked lower than 38 (%) 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.

Valued Advisers Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Valued Advisers Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Valued Advisers is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SOFR and Valued Advisers

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

The idea behind SOFR and Valued Advisers Trust 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.