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 37 15 SEP 26, 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

0.69

Correlation Coefficient

SOFR  WPLAU

Poor diversification

The 3 months correlation between SOFR and WPLAU is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SOFR and WPLAU 37 15 SEP 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPLAU 37 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 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 37 15 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 1.75 times less return on investment than WPLAU. But when comparing it to its historical volatility, SOFR is 14.76 times less risky than WPLAU. It trades about 0.72 of its potential returns per unit of risk. WPLAU 37 15 SEP 26 is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  9,400  in WPLAU 37 15 SEP 26 on September 23, 2024 and sell it today you would earn a total of  403.00  from holding WPLAU 37 15 SEP 26 or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	43.53%
Values	Daily Returns

SOFR  vs.  WPLAU 37 15 SEP 26

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 37 15

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPLAU 37 15 SEP 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WPLAU is not utilizing all of its potentials. The current 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 37 15 SEP 26 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.

Check out your portfolio center.

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.