Correlation Between SOFR and Saba Capital

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

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

Diversification Opportunities for SOFR and Saba Capital

0.92

Correlation Coefficient

SOFR  Saba Capital

Almost no diversification

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

Pair Corralation between SOFR and Saba Capital

Given the investment horizon of 90 days SOFR is expected to generate 6.94 times less return on investment than Saba Capital. But when comparing it to its historical volatility, SOFR is 22.43 times less risky than Saba Capital. It trades about 0.42 of its potential returns per unit of risk. Saba Capital Income is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  864.00  in Saba Capital Income on September 22, 2024 and sell it today you would earn a total of  25.00  from holding Saba Capital Income or generate 2.89% return on investment over 90 days.

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

SOFR  vs.  Saba Capital Income

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Saba Capital Income

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saba Capital Income are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Saba Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SOFR and Saba Capital

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

The idea behind SOFR and Saba Capital Income 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.