Correlation Between SoFi Technologies and Capital One

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

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

Diversification Opportunities for SoFi Technologies and Capital One

0.95

Correlation Coefficient

SoFi Technologies  Capital One

Almost no diversification

The 3 months correlation between SoFi and Capital is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and Capital One go up and down completely randomly.

Pair Corralation between SoFi Technologies and Capital One

Given the investment horizon of 90 days SoFi Technologies is expected to generate 1.23 times more return on investment than Capital One. However, SoFi Technologies is 1.23 times more volatile than Capital One Financial. It trades about 0.36 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.17 per unit of risk. If you would invest  799.00  in SoFi Technologies on August 30, 2024 and sell it today you would earn a total of  813.00  from holding SoFi Technologies or generate 101.75% return on investment over 90 days.

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

SoFi Technologies  vs.  Capital One Financial

SoFi Technologies

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 27 (%) 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.

Capital One Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoFi Technologies and Capital One

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

The idea behind SoFi Technologies and Capital One Financial 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.