Correlation Between SOFI TECHNOLOGIES and ARISTOCRAT LEISURE

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and ARISTOCRAT LEISURE

0.96

Correlation Coefficient

SOFI TECHNOLOGIES  ARISTOCRAT LEISURE

Almost no diversification

The 3 months correlation between SOFI and ARISTOCRAT is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and ARISTOCRAT LEISURE

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 3.92 times more return on investment than ARISTOCRAT LEISURE. However, SOFI TECHNOLOGIES is 3.92 times more volatile than ARISTOCRAT LEISURE. It trades about 0.07 of its potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.15 per unit of risk. If you would invest  495.00  in SOFI TECHNOLOGIES on October 11, 2024 and sell it today you would earn a total of  942.00  from holding SOFI TECHNOLOGIES or generate 190.3% 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.  ARISTOCRAT LEISURE

SOFI TECHNOLOGIES

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 21 (%) 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.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOFI TECHNOLOGIES and ARISTOCRAT LEISURE

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

The idea behind SOFI TECHNOLOGIES and ARISTOCRAT LEISURE 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.