Correlation Between SOFI TECHNOLOGIES and Virtu Financial

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and Virtu Financial

0.95

Correlation Coefficient

SOFI TECHNOLOGIES  Virtu Financial

Almost no diversification

The 3 months correlation between SOFI and Virtu is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and Virtu Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtu Financial and SOFI TECHNOLOGIES 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 SOFI TECHNOLOGIES are associated (or correlated) with Virtu Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtu Financial has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and Virtu Financial go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and Virtu Financial

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 2.01 times more return on investment than Virtu Financial. However, SOFI TECHNOLOGIES is 2.01 times more volatile than Virtu Financial. It trades about 0.07 of its potential returns per unit of risk. Virtu Financial is currently generating about 0.08 per unit of risk. If you would invest  484.00  in SOFI TECHNOLOGIES on October 4, 2024 and sell it today you would earn a total of  1,019  from holding SOFI TECHNOLOGIES or generate 210.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

SOFI TECHNOLOGIES  vs.  Virtu Financial

SOFI TECHNOLOGIES

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Virtu Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtu Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOFI TECHNOLOGIES and Virtu Financial

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

The idea behind SOFI TECHNOLOGIES and Virtu Financial 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.