Correlation Between NVIDIA and SoFi Technologies

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

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

Diversification Opportunities for NVIDIA and SoFi Technologies

0.75

Correlation Coefficient

NVIDIA  SoFi Technologies

Poor diversification

The 3 months correlation between NVIDIA and SoFi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and SoFi Technologies go up and down completely randomly.

Pair Corralation between NVIDIA and SoFi Technologies

Given the investment horizon of 90 days NVIDIA is expected to generate 4.35 times less return on investment than SoFi Technologies. But when comparing it to its historical volatility, NVIDIA is 1.37 times less risky than SoFi Technologies. It trades about 0.12 of its potential returns per unit of risk. SoFi Technologies is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  774.00  in SoFi Technologies on September 13, 2024 and sell it today you would earn a total of  820.00  from holding SoFi Technologies or generate 105.94% return on investment over 90 days.

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

NVIDIA  vs.  SoFi Technologies

NVIDIA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

SoFi Technologies

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical and fundamental indicators, SoFi Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and SoFi Technologies

The main advantage of trading using opposite NVIDIA and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..