Correlation Between SoFi Technologies and Visa

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

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

Diversification Opportunities for SoFi Technologies and Visa

0.16

Correlation Coefficient

SoFi Technologies  Visa

Average diversification

The 3 months correlation between SoFi and Visa is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and Visa go up and down completely randomly.

Pair Corralation between SoFi Technologies and Visa

Given the investment horizon of 90 days SoFi Technologies is expected to under-perform the Visa. In addition to that, SoFi Technologies is 4.14 times more volatile than Visa Class A. It trades about -0.05 of its total potential returns per unit of risk. Visa Class A is currently generating about 0.22 per unit of volatility. If you would invest  31,417  in Visa Class A on November 27, 2024 and sell it today you would earn a total of  3,785  from holding Visa Class A or generate 12.05% return on investment over 90 days.

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

SoFi Technologies  vs.  Visa Class A

SoFi Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days SoFi Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Visa Class A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with SoFi Technologies and Visa

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

The idea behind SoFi Technologies and Visa Class A 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.