Correlation Between Clean Energy and SOFI TECHNOLOGIES

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

By analyzing existing cross correlation between Clean Energy Fuels and SOFI TECHNOLOGIES, you can compare the effects of market volatilities on Clean Energy and SOFI TECHNOLOGIES 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 Clean Energy with a short position of SOFI TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Energy and SOFI TECHNOLOGIES.

Diversification Opportunities for Clean Energy and SOFI TECHNOLOGIES

0.17

Correlation Coefficient

Clean Energy  SOFI TECHNOLOGIES

Average diversification

The 3 months correlation between Clean and SOFI is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Clean Energy Fuels and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES and Clean Energy 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 Clean Energy Fuels are associated (or correlated) with SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of Clean Energy i.e., Clean Energy and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between Clean Energy and SOFI TECHNOLOGIES

Assuming the 90 days horizon Clean Energy is expected to generate 4.69 times less return on investment than SOFI TECHNOLOGIES. In addition to that, Clean Energy is 1.03 times more volatile than SOFI TECHNOLOGIES. It trades about 0.07 of its total potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.34 per unit of volatility. If you would invest  720.00  in SOFI TECHNOLOGIES on September 3, 2024 and sell it today you would earn a total of  844.00  from holding SOFI TECHNOLOGIES or generate 117.22% return on investment over 90 days.

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

Clean Energy Fuels  vs.  SOFI TECHNOLOGIES

Clean Energy Fuels

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Energy Fuels are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Clean Energy reported solid returns over the last few months and may actually be approaching a breakup point.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Energy and SOFI TECHNOLOGIES

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

The idea behind Clean Energy Fuels and SOFI TECHNOLOGIES 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.