Correlation Between SOFI TECHNOLOGIES and Alfen NV

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and Alfen NV

-0.69

Correlation Coefficient

SOFI TECHNOLOGIES  Alfen NV

Excellent diversification

The 3 months correlation between SOFI and Alfen is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and Alfen NV go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and Alfen NV

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 2.06 times less return on investment than Alfen NV. But when comparing it to its historical volatility, SOFI TECHNOLOGIES is 1.04 times less risky than Alfen NV. It trades about 0.03 of its potential returns per unit of risk. Alfen NV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,127  in Alfen NV on September 27, 2024 and sell it today you would earn a total of  24.00  from holding Alfen NV or generate 2.13% return on investment over 90 days.

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

SOFI TECHNOLOGIES  vs.  Alfen NV

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.

Alfen NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alfen NV 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 Alfen NV

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

The idea behind SOFI TECHNOLOGIES and Alfen NV 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.