Correlation Between SOFR and WPLAU

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

By analyzing existing cross correlation between SOFR and WPLAU 365 05 MAR 25, you can compare the effects of market volatilities on SOFR and WPLAU 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 WPLAU. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFR and WPLAU.

Diversification Opportunities for SOFR and WPLAU

0.93

Correlation Coefficient

SOFR  WPLAU

Almost no diversification

The 3 months correlation between SOFR and WPLAU is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and WPLAU 365 05 MAR 25 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPLAU 365 05 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 WPLAU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPLAU 365 05 has no effect on the direction of SOFR i.e., SOFR and WPLAU go up and down completely randomly.

Pair Corralation between SOFR and WPLAU

Given the investment horizon of 90 days SOFR is expected to generate 0.93 times more return on investment than WPLAU. However, SOFR is 1.08 times less risky than WPLAU. It trades about 0.38 of its potential returns per unit of risk. WPLAU 365 05 MAR 25 is currently generating about 0.11 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 Together
Strength	Very Strong
Accuracy	57.14%
Values	Daily Returns

SOFR  vs.  WPLAU 365 05 MAR 25

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.

WPLAU 365 05

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WPLAU 365 05 MAR 25 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, WPLAU is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SOFR and WPLAU

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

The idea behind SOFR and WPLAU 365 05 MAR 25 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.