Correlation Between SOFI TECHNOLOGIES and PENN NATL

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and PENN NATL

0.63

Correlation Coefficient

SOFI TECHNOLOGIES  PENN NATL

Poor diversification

The 3 months correlation between SOFI and PENN is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SOFI TECHNOLOGIES and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of SOFI TECHNOLOGIES i.e., SOFI TECHNOLOGIES and PENN NATL go up and down completely randomly.

Pair Corralation between SOFI TECHNOLOGIES and PENN NATL

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to under-perform the PENN NATL. In addition to that, SOFI TECHNOLOGIES is 1.4 times more volatile than PENN NATL GAMING. It trades about -0.09 of its total potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.05 per unit of volatility. If you would invest  1,769  in PENN NATL GAMING on December 19, 2024 and sell it today you would lose (198.00) from holding PENN NATL GAMING or give up 11.19% of portfolio value over 90 days.

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

SOFI TECHNOLOGIES  vs.  PENN NATL GAMING

SOFI TECHNOLOGIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOFI TECHNOLOGIES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PENN NATL GAMING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with SOFI TECHNOLOGIES and PENN NATL

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

The idea behind SOFI TECHNOLOGIES and PENN NATL GAMING 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.