Correlation Between First United and SoFi Technologies

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

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

Diversification Opportunities for First United and SoFi Technologies

-0.41

Correlation Coefficient

First United  SoFi Technologies

Very good diversification

The 3 months correlation between First and SoFi is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding First United and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies and First United 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 First United 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 First United i.e., First United and SoFi Technologies go up and down completely randomly.

Pair Corralation between First United and SoFi Technologies

Given the investment horizon of 90 days First United is expected to generate 0.24 times more return on investment than SoFi Technologies. However, First United is 4.15 times less risky than SoFi Technologies. It trades about -0.03 of its potential returns per unit of risk. SoFi Technologies is currently generating about -0.07 per unit of risk. If you would invest  2,337  in First United on February 1, 2024 and sell it today you would lose (78.00) from holding First United or give up 3.34% of portfolio value over 90 days.

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

First United  vs.  SoFi Technologies

First United

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First United are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First United is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

SoFi Technologies

Risk-Adjusted Performance

0 of 100

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 weak 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.

Pair Trading with First United and SoFi Technologies

The main advantage of trading using opposite First United and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First United 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' long position.

The idea behind First United 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..