Correlation Between SOFR and BHCCN

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

By analyzing existing cross correlation between SOFR and BHCCN 14 15 OCT 30, you can compare the effects of market volatilities on SOFR and BHCCN 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 BHCCN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFR and BHCCN.

Diversification Opportunities for SOFR and BHCCN

0.77

Correlation Coefficient

SOFR  BHCCN

Poor diversification

The 3 months correlation between SOFR and BHCCN is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and BHCCN 14 15 OCT 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHCCN 14 15 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 BHCCN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHCCN 14 15 has no effect on the direction of SOFR i.e., SOFR and BHCCN go up and down completely randomly.

Pair Corralation between SOFR and BHCCN

Given the investment horizon of 90 days SOFR is expected to generate 6.68 times less return on investment than BHCCN. But when comparing it to its historical volatility, SOFR is 82.62 times less risky than BHCCN. It trades about 0.72 of its potential returns per unit of risk. BHCCN 14 15 OCT 30 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,944  in BHCCN 14 15 OCT 30 on September 23, 2024 and sell it today you would earn a total of  1,924  from holding BHCCN 14 15 OCT 30 or generate 32.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.17%
Values	Daily Returns

SOFR  vs.  BHCCN 14 15 OCT 30

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.

BHCCN 14 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHCCN 14 15 OCT 30 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for BHCCN 14 15 OCT 30 investors.

Pair Trading with SOFR and BHCCN

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

The idea behind SOFR and BHCCN 14 15 OCT 30 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.