Correlation Between SOFI TECHNOLOGIES and CeoTronics

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and CeoTronics

0.64

Correlation Coefficient

SOFI TECHNOLOGIES  CeoTronics

Poor diversification

The 3 months correlation between SOFI and CeoTronics is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and CeoTronics go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and CeoTronics

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to generate 7.79 times less return on investment than CeoTronics. But when comparing it to its historical volatility, SOFI TECHNOLOGIES is 1.54 times less risky than CeoTronics. It trades about 0.03 of its potential returns per unit of risk. CeoTronics AG is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  525.00  in CeoTronics AG on September 22, 2024 and sell it today you would earn a total of  60.00  from holding CeoTronics AG or generate 11.43% return on investment over 90 days.

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

SOFI TECHNOLOGIES  vs.  CeoTronics AG

SOFI TECHNOLOGIES

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 25 (%) 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.

CeoTronics AG

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile forward-looking signals, CeoTronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SOFI TECHNOLOGIES and CeoTronics

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

The idea behind SOFI TECHNOLOGIES and CeoTronics AG 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.