Correlation Between WKLY and SoFi Next

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

By analyzing existing cross correlation between WKLY and SoFi Next 500, you can compare the effects of market volatilities on WKLY and SoFi Next 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 WKLY with a short position of SoFi Next. Check out your portfolio center. Please also check ongoing floating volatility patterns of WKLY and SoFi Next.

Diversification Opportunities for WKLY and SoFi Next

-0.36

Correlation Coefficient

WKLY  SoFi Next

Very good diversification

The 3 months correlation between WKLY and SoFi is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding WKLY and SoFi Next 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Next 500 and WKLY 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 WKLY are associated (or correlated) with SoFi Next. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Next 500 has no effect on the direction of WKLY i.e., WKLY and SoFi Next go up and down completely randomly.

Pair Corralation between WKLY and SoFi Next

Given the investment horizon of 90 days WKLY is expected to generate 2.28 times less return on investment than SoFi Next. But when comparing it to its historical volatility, WKLY is 1.45 times less risky than SoFi Next. It trades about 0.03 of its potential returns per unit of risk. SoFi Next 500 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,202  in SoFi Next 500 on October 25, 2024 and sell it today you would earn a total of  320.00  from holding SoFi Next 500 or generate 26.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.73%
Values	Daily Returns

WKLY  vs.  SoFi Next 500

WKLY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WKLY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, WKLY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SoFi Next 500

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Next 500 are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, SoFi Next may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WKLY and SoFi Next

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

The idea behind WKLY and SoFi Next 500 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.