Correlation Between Skillz Platform and SoFi Technologies

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

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

Diversification Opportunities for Skillz Platform and SoFi Technologies

0.07

Correlation Coefficient

Skillz Platform  SoFi Technologies

Significant diversification

The 3 months correlation between Skillz and SoFi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Skillz Platform and SoFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoFi Technologies and Skillz Platform 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 Skillz Platform 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 Skillz Platform i.e., Skillz Platform and SoFi Technologies go up and down completely randomly.

Pair Corralation between Skillz Platform and SoFi Technologies

Given the investment horizon of 90 days Skillz Platform is expected to generate 1.74 times more return on investment than SoFi Technologies. However, Skillz Platform is 1.74 times more volatile than SoFi Technologies. It trades about 0.35 of its potential returns per unit of risk. SoFi Technologies is currently generating about 0.03 per unit of risk. If you would invest  544.00  in Skillz Platform on March 11, 2024 and sell it today you would earn a total of  154.00  from holding Skillz Platform or generate 28.31% return on investment over 90 days.

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

Skillz Platform  vs.  SoFi Technologies

Skillz Platform

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Skillz Platform are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Skillz Platform is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 conflicting 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 Skillz Platform and SoFi Technologies

The main advantage of trading using opposite Skillz Platform and SoFi Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Skillz Platform 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 Skillz Platform 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.