Correlation Between Lumen Technologies and SoFi Technologies
Can any of the company-specific risk be diversified away by investing in both Lumen Technologies 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 Lumen Technologies and SoFi Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumen Technologies and SoFi Technologies, you can compare the effects of market volatilities on Lumen Technologies 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 Lumen Technologies with a short position of SoFi Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumen Technologies and SoFi Technologies.
Diversification Opportunities for Lumen Technologies and SoFi Technologies
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumen and SoFi is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Lumen Technologies and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies and Lumen 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 Lumen Technologies 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 Lumen Technologies i.e., Lumen Technologies and SoFi Technologies go up and down completely randomly.
Pair Corralation between Lumen Technologies and SoFi Technologies
Given the investment horizon of 90 days Lumen Technologies is expected to generate 3.52 times more return on investment than SoFi Technologies. However, Lumen Technologies is 3.52 times more volatile than SoFi Technologies. It trades about 0.17 of its potential returns per unit of risk. SoFi Technologies is currently generating about 0.24 per unit of risk. If you would invest 129.00 in Lumen Technologies on September 1, 2024 and sell it today you would earn a total of 605.00 from holding Lumen Technologies or generate 468.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lumen Technologies vs. SoFi Technologies
Performance |
| Timeline |
| Lumen Technologies |
| SoFi Technologies |
Lumen Technologies and SoFi Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumen Technologies and SoFi Technologies
The main advantage of trading using opposite Lumen Technologies and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumen Technologies 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.| Lumen Technologies vs. Verizon Communications | Lumen Technologies vs. T Mobile | Lumen Technologies vs. Comcast Corp | Lumen Technologies vs. ATT Inc |
| SoFi Technologies vs. 360 Finance | SoFi Technologies vs. Atlanticus Holdings | SoFi Technologies vs. Qudian Inc | SoFi Technologies vs. Enova International |
Check out your portfolio center.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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