Correlation Between SOFI TECHNOLOGIES and Carrier Global

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and Carrier Global

-0.28

Correlation Coefficient

SOFI TECHNOLOGIES  Carrier Global

Very good diversification

The 3 months correlation between SOFI and Carrier is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and Carrier Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrier Global 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 Carrier Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrier Global has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and Carrier Global go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and Carrier Global

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 1.32 times more return on investment than Carrier Global. However, SOFI TECHNOLOGIES is 1.32 times more volatile than Carrier Global. It trades about 0.03 of its potential returns per unit of risk. Carrier Global is currently generating about -0.34 per unit of risk. If you would invest  1,460  in SOFI TECHNOLOGIES on September 27, 2024 and sell it today you would earn a total of  11.00  from holding SOFI TECHNOLOGIES or generate 0.75% return on investment over 90 days.

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

SOFI TECHNOLOGIES  vs.  Carrier Global

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.

Carrier Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carrier Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SOFI TECHNOLOGIES and Carrier Global

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

The idea behind SOFI TECHNOLOGIES and Carrier Global 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.