Correlation Between SOFI TECHNOLOGIES and BBVA Banco

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and BBVA Banco

0.87

Correlation Coefficient

SOFI TECHNOLOGIES  BBVA Banco

Very poor diversification

The 3 months correlation between SOFI and BBVA is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances 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 BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and BBVA Banco go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and BBVA Banco

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to under-perform the BBVA Banco. But the stock apears to be less risky and, when comparing its historical volatility, SOFI TECHNOLOGIES is 2.36 times less risky than BBVA Banco. The stock trades about -0.03 of its potential returns per unit of risk. The BBVA Banco Frances is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,630  in BBVA Banco Frances on October 11, 2024 and sell it today you would earn a total of  610.00  from holding BBVA Banco Frances or generate 37.42% 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.  BBVA Banco Frances

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

BBVA Banco Frances

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, BBVA Banco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOFI TECHNOLOGIES and BBVA Banco

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

The idea behind SOFI TECHNOLOGIES and BBVA Banco Frances 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.