Correlation Between SOFI TECHNOLOGIES and AXWAY SOFTWARE

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

By analyzing existing cross correlation between SOFI TECHNOLOGIES and AXWAY SOFTWARE EO, you can compare the effects of market volatilities on SOFI TECHNOLOGIES and AXWAY SOFTWARE 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 AXWAY SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOFI TECHNOLOGIES and AXWAY SOFTWARE.

Diversification Opportunities for SOFI TECHNOLOGIES and AXWAY SOFTWARE

0.85

Correlation Coefficient

SOFI TECHNOLOGIES  AXWAY SOFTWARE

Very poor diversification

The 3 months correlation between SOFI and AXWAY is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and AXWAY SOFTWARE EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXWAY SOFTWARE EO 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 AXWAY SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXWAY SOFTWARE EO has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and AXWAY SOFTWARE go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and AXWAY SOFTWARE

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 2.33 times more return on investment than AXWAY SOFTWARE. However, SOFI TECHNOLOGIES is 2.33 times more volatile than AXWAY SOFTWARE EO. It trades about 0.34 of its potential returns per unit of risk. AXWAY SOFTWARE EO is currently generating about 0.04 per unit of risk. If you would invest  1,339  in SOFI TECHNOLOGIES on September 19, 2024 and sell it today you would earn a total of  237.00  from holding SOFI TECHNOLOGIES or generate 17.7% return on investment over 90 days.

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

SOFI TECHNOLOGIES  vs.  AXWAY SOFTWARE EO

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 uncertain basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

AXWAY SOFTWARE EO

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXWAY SOFTWARE EO are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AXWAY SOFTWARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOFI TECHNOLOGIES and AXWAY SOFTWARE

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

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