Correlation Between Comstock Resources and SoFi Select

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

By analyzing existing cross correlation between Comstock Resources and SoFi Select 500, you can compare the effects of market volatilities on Comstock Resources and SoFi Select 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 Comstock Resources with a short position of SoFi Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Comstock Resources and SoFi Select.

Diversification Opportunities for Comstock Resources and SoFi Select

0.11

Correlation Coefficient

Comstock Resources  SoFi Select

Average diversification

The 3 months correlation between Comstock and SoFi is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Comstock Resources and SoFi Select 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Select 500 and Comstock Resources 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 Comstock Resources are associated (or correlated) with SoFi Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoFi Select 500 has no effect on the direction of Comstock Resources i.e., Comstock Resources and SoFi Select go up and down completely randomly.

Pair Corralation between Comstock Resources and SoFi Select

Considering the 90-day investment horizon Comstock Resources is expected to generate 2.89 times more return on investment than SoFi Select. However, Comstock Resources is 2.89 times more volatile than SoFi Select 500. It trades about 0.11 of its potential returns per unit of risk. SoFi Select 500 is currently generating about -0.03 per unit of risk. If you would invest  1,536  in Comstock Resources on December 18, 2024 and sell it today you would earn a total of  348.00  from holding Comstock Resources or generate 22.66% return on investment over 90 days.

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

Comstock Resources  vs.  SoFi Select 500

Comstock Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comstock Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Comstock Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

SoFi Select 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoFi Select 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, SoFi Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Comstock Resources and SoFi Select

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

The idea behind Comstock Resources and SoFi Select 500 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.