Correlation Between SoFi Technologies and Carvana

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

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

Diversification Opportunities for SoFi Technologies and Carvana

-0.29

Correlation Coefficient

SoFi Technologies  Carvana

Very good diversification

The 3 months correlation between SoFi and Carvana is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding SoFi Technologies and Carvana Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana 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 Carvana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana has no effect on the direction of SoFi Technologies i.e., SoFi Technologies and Carvana go up and down completely randomly.

Pair Corralation between SoFi Technologies and Carvana

Given the investment horizon of 90 days SoFi Technologies is expected to generate 0.92 times more return on investment than Carvana. However, SoFi Technologies is 1.09 times less risky than Carvana. It trades about -0.05 of its potential returns per unit of risk. Carvana Co is currently generating about -0.3 per unit of risk. If you would invest  736.00  in SoFi Technologies on January 20, 2024 and sell it today you would lose (23.00) from holding SoFi Technologies or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

SoFi Technologies  vs.  Carvana Co

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 fairly strong technical and fundamental indicators, SoFi Technologies is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Carvana

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Carvana sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SoFi Technologies and Carvana

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

The idea behind SoFi Technologies and Carvana Co 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.