Correlation Between SOFI TECHNOLOGIES and CVW CLEANTECH

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

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

Diversification Opportunities for SOFI TECHNOLOGIES and CVW CLEANTECH

0.63

Correlation Coefficient

SOFI TECHNOLOGIES  CVW CLEANTECH

Poor diversification

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

Pair Corralation between SOFI TECHNOLOGIES and CVW CLEANTECH

Assuming the 90 days horizon SOFI TECHNOLOGIES is expected to under-perform the CVW CLEANTECH. In addition to that, SOFI TECHNOLOGIES is 1.16 times more volatile than CVW CLEANTECH INC. It trades about -0.05 of its total potential returns per unit of risk. CVW CLEANTECH INC is currently generating about -0.01 per unit of volatility. If you would invest  55.00  in CVW CLEANTECH INC on December 27, 2024 and sell it today you would lose (3.00) from holding CVW CLEANTECH INC or give up 5.45% of portfolio value over 90 days.

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

SOFI TECHNOLOGIES  vs.  CVW CLEANTECH INC

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.

CVW CLEANTECH INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVW CLEANTECH INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, CVW CLEANTECH is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SOFI TECHNOLOGIES and CVW CLEANTECH

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

The idea behind SOFI TECHNOLOGIES and CVW CLEANTECH INC 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.