Correlation Between SoFi Technologies and SMA Solar

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

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

Diversification Opportunities for SoFi Technologies and SMA Solar

-0.89

Correlation Coefficient

SoFi Technologies  SMA Solar

Pay attention - limited upside

The 3 months correlation between SoFi and SMA is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and SMA Solar go up and down completely randomly.

Pair Corralation between SoFi Technologies and SMA Solar

Given the investment horizon of 90 days SoFi Technologies is expected to generate 0.79 times more return on investment than SMA Solar. However, SoFi Technologies is 1.27 times less risky than SMA Solar. It trades about 0.36 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.16 per unit of risk. If you would invest  806.00  in SoFi Technologies on September 16, 2024 and sell it today you would earn a total of  819.00  from holding SoFi Technologies or generate 101.61% return on investment over 90 days.

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

SoFi Technologies  vs.  SMA Solar Technology

SoFi Technologies

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SoFi Technologies are ranked lower than 28 (%) 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.

SMA Solar Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMA Solar Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SoFi Technologies and SMA Solar

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

The idea behind SoFi Technologies and SMA Solar Technology 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.