Correlation Between X FAB and SOFI TECHNOLOGIES

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

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

Diversification Opportunities for X FAB and SOFI TECHNOLOGIES

0.9

Correlation Coefficient

X FAB  SOFI TECHNOLOGIES

Almost no diversification

The 3 months correlation between XFB and SOFI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI TECHNOLOGIES and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and SOFI TECHNOLOGIES go up and down completely randomly.

Pair Corralation between X FAB and SOFI TECHNOLOGIES

Assuming the 90 days trading horizon X FAB is expected to generate 1.72 times less return on investment than SOFI TECHNOLOGIES. But when comparing it to its historical volatility, X FAB Silicon Foundries is 1.35 times less risky than SOFI TECHNOLOGIES. It trades about 0.22 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,085  in SOFI TECHNOLOGIES on April 24, 2025 and sell it today you would earn a total of  761.00  from holding SOFI TECHNOLOGIES or generate 70.14% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  SOFI TECHNOLOGIES

X FAB Silicon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, X FAB exhibited solid returns over the last few months and may actually be approaching a breakup point.

SOFI TECHNOLOGIES

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SOFI TECHNOLOGIES are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SOFI TECHNOLOGIES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and SOFI TECHNOLOGIES

The main advantage of trading using opposite X FAB and SOFI TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.