Correlation Between SOFR and Nationwide

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

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

Diversification Opportunities for SOFR and Nationwide

0.87

Correlation Coefficient

SOFR  Nationwide

Very poor diversification

The 3 months correlation between SOFR and Nationwide is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and Nationwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nationwide 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 Nationwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nationwide has no effect on the direction of SOFR i.e., SOFR and Nationwide go up and down completely randomly.

Pair Corralation between SOFR and Nationwide

If you would invest  9,815  in SOFR on September 29, 2024 and sell it today you would earn a total of  204.00  from holding SOFR or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	0.79%
Values	Daily Returns

SOFR  vs.  Nationwide

SOFR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SOFR are ranked lower than 10 (%) 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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Nationwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nationwide has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Nationwide is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with SOFR and Nationwide

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

The idea behind SOFR and Nationwide 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 Anywhere module to track or share privately all of your investments from the convenience of any device.