Correlation Between SoFi Technologies and Qudian

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

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

Diversification Opportunities for SoFi Technologies and Qudian

0.81

Correlation Coefficient

SoFi Technologies  Qudian

Very poor diversification

The 3 months correlation between SoFi and Qudian is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and Qudian Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qudian Inc 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 Qudian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qudian Inc has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and Qudian go up and down completely randomly.

Pair Corralation between SoFi Technologies and Qudian

Given the investment horizon of 90 days SoFi Technologies is expected to generate 0.67 times more return on investment than Qudian. However, SoFi Technologies is 1.5 times less risky than Qudian. It trades about 0.23 of its potential returns per unit of risk. Qudian Inc is currently generating about 0.1 per unit of risk. If you would invest  1,040  in SoFi Technologies on October 20, 2024 and sell it today you would earn a total of  610.00  from holding SoFi Technologies or generate 58.65% return on investment over 90 days.

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

SoFi Technologies  vs.  Qudian Inc

SoFi Technologies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 18 (%) 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.

Qudian Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qudian Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Qudian exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoFi Technologies and Qudian

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

The idea behind SoFi Technologies and Qudian Inc 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.