Correlation Between SoFi Technologies and Nippon Steel

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

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

Diversification Opportunities for SoFi Technologies and Nippon Steel

-0.67

Correlation Coefficient

SoFi Technologies  Nippon Steel

Excellent diversification

The 3 months correlation between SoFi and Nippon is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel Corp has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and Nippon Steel go up and down completely randomly.

Pair Corralation between SoFi Technologies and Nippon Steel

Given the investment horizon of 90 days SoFi Technologies is expected to generate 1.18 times more return on investment than Nippon Steel. However, SoFi Technologies is 1.18 times more volatile than Nippon Steel Corp. It trades about 0.56 of its potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.06 per unit of risk. If you would invest  1,091  in SoFi Technologies on September 5, 2024 and sell it today you would earn a total of  497.00  from holding SoFi Technologies or generate 45.55% return on investment over 90 days.

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

SoFi Technologies  vs.  Nippon Steel Corp

SoFi Technologies

Risk-Adjusted Performance

32 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 32 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, SoFi Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nippon Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with SoFi Technologies and Nippon Steel

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

The idea behind SoFi Technologies and Nippon Steel Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.