Correlation Between SOFR and 694308KB2

Can any of the company-specific risk be diversified away by investing in both SOFR and 694308KB2 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 694308KB2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOFR and PCG 42 01 MAR 29, you can compare the effects of market volatilities on SOFR and 694308KB2 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 694308KB2. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFR and 694308KB2.

Diversification Opportunities for SOFR and 694308KB2

-0.62

Correlation Coefficient

SOFR  694308KB2

Excellent diversification

The 3 months correlation between SOFR and 694308KB2 is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and PCG 42 01 MAR 29 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PCG 42 01 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 694308KB2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PCG 42 01 has no effect on the direction of SOFR i.e., SOFR and 694308KB2 go up and down completely randomly.

Pair Corralation between SOFR and 694308KB2

Given the investment horizon of 90 days SOFR is expected to generate 0.03 times more return on investment than 694308KB2. However, SOFR is 33.96 times less risky than 694308KB2. It trades about 0.38 of its potential returns per unit of risk. PCG 42 01 MAR 29 is currently generating about -0.16 per unit of risk. If you would invest  10,011  in SOFR on September 23, 2024 and sell it today you would earn a total of  39.00  from holding SOFR or generate 0.39% return on investment over 90 days.

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

SOFR  vs.  PCG 42 01 MAR 29

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.

PCG 42 01

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PCG 42 01 MAR 29 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PCG 42 01 MAR 29 investors.

Pair Trading with SOFR and 694308KB2

The main advantage of trading using opposite SOFR and 694308KB2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOFR position performs unexpectedly, 694308KB2 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 694308KB2 will offset losses from the drop in 694308KB2's long position.

The idea behind SOFR and PCG 42 01 MAR 29 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.