Correlation Between Affirm Holdings and SoFi Technologies

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

By analyzing existing cross correlation between Affirm Holdings and SoFi Technologies, you can compare the effects of market volatilities on Affirm Holdings and SoFi Technologies 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 Affirm Holdings with a short position of SoFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affirm Holdings and SoFi Technologies.

Diversification Opportunities for Affirm Holdings and SoFi Technologies

0.56

Correlation Coefficient

Affirm Holdings  SoFi Technologies

Very weak diversification

The 3 months correlation between Affirm and SoFi is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Affirm Holdings and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies and Affirm Holdings 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 Affirm Holdings are associated (or correlated) with SoFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Technologies has no effect on the direction of Affirm Holdings i.e., Affirm Holdings and SoFi Technologies go up and down completely randomly.

Pair Corralation between Affirm Holdings and SoFi Technologies

Given the investment horizon of 90 days Affirm Holdings is expected to under-perform the SoFi Technologies. In addition to that, Affirm Holdings is 1.2 times more volatile than SoFi Technologies. It trades about -0.06 of its total potential returns per unit of risk. SoFi Technologies is currently generating about -0.07 per unit of volatility. If you would invest  1,563  in SoFi Technologies on December 28, 2024 and sell it today you would lose (343.00) from holding SoFi Technologies or give up 21.94% of portfolio value over 90 days.

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

Affirm Holdings  vs.  SoFi Technologies

Affirm Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affirm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Affirm Holdings and SoFi Technologies

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

The idea behind Affirm Holdings and SoFi Technologies 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.