Correlation Between SOFI TECHNOLOGIES and Consolidated Communications

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and Consolidated Communications

0.96

Correlation Coefficient

SOFI TECHNOLOGIES  Consolidated Communications

Almost no diversification

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

Pair Corralation between SOFI TECHNOLOGIES and Consolidated Communications

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 5.35 times more return on investment than Consolidated Communications. However, SOFI TECHNOLOGIES is 5.35 times more volatile than Consolidated Communications Holdings. It trades about 0.27 of its potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.17 per unit of risk. If you would invest  760.00  in SOFI TECHNOLOGIES on October 6, 2024 and sell it today you would earn a total of  614.00  from holding SOFI TECHNOLOGIES or generate 80.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

SOFI TECHNOLOGIES  vs.  Consolidated Communications Ho

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

Consolidated Communications

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Consolidated Communications Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SOFI TECHNOLOGIES and Consolidated Communications

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

The idea behind SOFI TECHNOLOGIES and Consolidated Communications Holdings 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.