Correlation Between SoFi Technologies and Liberty Defense

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

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

Diversification Opportunities for SoFi Technologies and Liberty Defense

-0.44

Correlation Coefficient

SoFi Technologies  Liberty Defense

Very good diversification

The 3 months correlation between SoFi and Liberty is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and Liberty Defense Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Defense Holdings 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 Liberty Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Defense Holdings has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and Liberty Defense go up and down completely randomly.

Pair Corralation between SoFi Technologies and Liberty Defense

Given the investment horizon of 90 days SoFi Technologies is expected to generate 3.31 times less return on investment than Liberty Defense. But when comparing it to its historical volatility, SoFi Technologies is 1.56 times less risky than Liberty Defense. It trades about 0.12 of its potential returns per unit of risk. Liberty Defense Holdings is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Liberty Defense Holdings on October 21, 2024 and sell it today you would earn a total of  17.00  from holding Liberty Defense Holdings or generate 28.33% return on investment over 90 days.

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

SoFi Technologies  vs.  Liberty Defense Holdings

SoFi Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical and fundamental indicators, SoFi Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Liberty Defense Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Defense Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Liberty Defense reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoFi Technologies and Liberty Defense

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

The idea behind SoFi Technologies and Liberty Defense Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.